Dr. Agarwal’s says merger valuation structured through fair and transparent process
Dr. Agarwal’s Eye Hospital Ltd (AEHL) says its proposed merger with holding company Dr. Agarwal’s Health Care Ltd (AHCL) has been structured through a transparent process backed by independent evaluations. The move, aimed at creating a single listed entity, has drawn questions from some investors after AEHL’s stock fell 18% post-announcement. AEHL stock gained 0.58% to close at Rs. 4,680.35 on BSE on Thursday. AHCL stock rose 0.94% to end at Rs 443.70 on Thursday.
Below are the excerpts of company's response to Moneycontrol questions.Could you walk us through the structure of the proposed merger?
We’ve announced the merger of AEHL with AHCL to create a single listed entity. AHCL will issue shares to AEHL’s minority shareholders, while its existing stake in AEHL will be cancelled. Additionally, AEHL’s board has approved a Rs 70 crore preferential allotment to AHCL to fund its flagship Chennai facility. This infusion is independent of the merger and will be completed beforehand.What’s the strategic rationale behind this move?
The merger simplifies our corporate structure, enhances operational and financial efficiency, and accelerates growth. AEHL shareholders gain access to AHCL’s pan-India network, a larger clinical talent pool, and a company with higher market capitalisation. For AHCL shareholders, it means streamlined governance and integrated operations.How is swap ratio determined?
The swap ratio—23 AHCL shares (Re 1 face value) for every 2 AEHL shares (Rs 10 face value)—was based on independent valuations by PwC and Bansi Mehta & Co., using globally accepted methods and market price trends. Kotak Mahindra Capital and Motilal Oswal provided fairness opinions. The ratio implies a 15% premium over the one-month average price prior to the announcement.Can you elaborate on AEHL’s preferential issue and the need for additional capital? Would this preferential issue have any impact on the merger?
To support growth for the subsidiary company, the Board of AEHL has also approved a preferential issue aggregating approximately Rs 70 crore, comprising 1,32,827 equity shares at an issue price of Rs 5,270 per share , aligned with the merger pricing. This capital infusion will further strengthen AEHL’s balance sheet and ensure a smooth transition.
The preferential allotment is being undertaken for funding the construction of our flagship facility in Chennai. Since the capex requirement is immediate, we are simultaneously proceeding with the preferential allotment along with the Merger. The primary infusion will be completed ahead of the merger completion.What’s the expected timeline and post-merger shareholding?
The merger should close in 12–14 months, subject to approvals. Post-merger, AEHL’s public shareholders will hold 4.6%, AHCL promoters 30.9%, and AHCL’s public shareholders 64.5%.How does this align with AHCL’s IPO promise?When AHCL listed earlier this year, we committed to consolidating operations within three years. This merger delivers on that promise and positions us for long-term growth with a simplified governance framework.