Both Dr Agarwal shares tanked on Thursday, but Morgan Stanley sees merger as re-rating play
Published on 29/08/2025 08:54 AM
Both Dr Agarwal shares tanked on Thursday, but Morgan Stanley sees merger as re-rating playAccording to brokerage firm Morgan Stanley, a single listed entity structure could improve transparency, reduce complexity, and act as a potential re-rating trigger.By Meghna Sen August 29, 2025, 8:54:39 AM IST (Updated)2 Min ReadShares of Dr. Agarwal's Health Care Ltd., which fell 7% on Thursday, are expected to remain in focus in Friday's (August 29) trading session.
Global brokerage firm Morgan Stanley has an 'Overweight' rating on the stock with a price target of ₹494, implying a potential upside of about 12% from Thursday's closing level.
The boards of Dr. Agarwal's Health Care (AHCL) and Dr. Agarwal's Eye Hospital (AEHL) have approved the merger of AEHL into AHCL. The move is expected to streamline operations, provide unified management focus, and drive strategic alignment.
Currently, AHCL holds a 71.9% stake in AEHL, which contributed 23% to the parent's profit after tax in the first quarter of FY26. The merger is expected to enhance shareholder value and be EPS accretive from the first year of implementation, according to AEHL's filing.
Morgan Stanley said that the trailing acquisition EV/EBITDA multiple for AEHL is 22x, about a 14% discount to the hospital sector average of 25.4x for FY26. It added that a single listed entity structure could improve transparency, reduce complexity, and act as a potential re-rating trigger.
Listed in February 2025, Dr. Agarwal's Health Care had earlier indicated plans to explore a merger with its eye hospital unit within three years of listing.
As part of the transaction, AHCL will issue and allot 23 new equity shares of face value ₹1 each for every two equity shares of ₹10 each held by AEHL shareholders on the record date.
Additionally, AHCL approved a preferential issue of shares worth ₹70 crore, comprising 1.32 lakh equity shares at ₹5,270 per share, representing 2.7% of its total equity capital.
"The merger is an important strategic step in the Group's journey and will help unlock the full potential of the combined businesses. This long-awaited step towards building a simpler and more efficient structure reflects our commitment to creating significant long-term value for stakeholders," said Adil Agarwal, CEO of Dr. Agarwal's Health Care.
On Thursday, shares of Dr. Agarwal's Eye Hospital ended 13.5% lower at ₹4,448, while Dr. Agarwal's Health Care closed 4.6% lower at ₹438.6, just above its IPO price of ₹402.Continue ReadingNote To ReadersDisclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.First Published: Aug 29, 2025 8:23 AM ISTCheck out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsDr Agarwals Healthcareshare market today