Dr. Agarwal's Health Care Limited — Q1 FY26 earnings call

Call held 28 Aug 2025

Management summary

Dr. Agarwal's Health Care Limited announced the proposed merger of its subsidiary, Dr. Agarwal's Eye Hospital, into the parent entity. The merger, intended to streamline operations and enhance financial efficiencies, involves a share swap ratio of 23 AHCL shares for every 2 AEHL shares, representing a 15% premium to AEHL's 10-day VWAP. However, the announcement was met with significant concerns from several minority shareholders of AEHL, who argued the swap ratio was unfair and undervalued their holdings, raising questions about the valuation process and corporate governance.

Highlights

  • The merger of Agarwal Eye Hospital Limited into Agarwal's Health Care Limited is an important strategic step in our group's journey and will drive both operational and financial efficiencies through streamlined functions and faster decision making.

  • It will enable unified capital allocation, strengthen the balance sheet to support future growth, and provide a simplified legal, regulatory, and governance framework.

  • The swap ratio implies a 15% premium for AEHL over AEHL's 10-day VWAP of INR 4,554 per share.

  • AEHL shareholders shall be benefited from this transaction on multiple grounds, including the fact that they will become shareholders of an entity which has a pan India presence with a much larger critical talent.

Concerns

  • Several analysts expressed strong displeasure and concern that the merger ratio of 23 AHCL shares for every 2 AEHL shares was unfair to the minority shareholders of Dr. Agarwal's Eye Hospital.

  • Analysts questioned the valuation methodology and perceived a conflict of interest, suggesting the ratio was significantly lower than basic financial analysis would indicate.

  • The merger process requires majority of minority approval at both AHCL and AEHL levels, with potential for delay if not approved.

Key financials

  1. Preferential Allotment Amount ₹70 Cr
  2. AEHL Equity Shares Post Allotment 48.3 lakh shares
  3. AEHL Promoter Holding Post Allotment 72.7%
  4. AEHL Public Holding Post Allotment 27.3%
  5. Combined Entity Share Capital ₹33.13 Cr
  6. AEHL Public Shareholding in Combined Entity 4.6%
  7. AHCL Public Shareholding in Combined Entity 64.5%
  8. Promoter Holding in Combined Entity 30.9%
  9. AEHL 10-day VWAP ₹4,554
  10. AEHL Share Price for Preferential Allotment ₹5,270

What they filed

Q1 FY27: revenue up 26.8%, net profit up 70.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue255 268 281 302 309 +21%335 +25%348 +24%383 +27%
EBITDA58 65 73 67 69 +19%80 +23%92 +26%96 +43%
Net profit-4 8 27 10 5 +225%14 +75%11 −59%17 +70%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex Capex disclosed through preferential allotment to AHCL, funded by AHCL's cash reserves
    • Construction of flagship facility at Cathedral Road ₹70 Cr
    The funds infused into AEHL will be utilized to finance its immediate fund requirements for the CAPEX plans, specifically for the construction of the flagship facility at Cathedral Road. Since we have a good amount of cash reserves at the holding company level, we felt that the preferential allotment done at a fair valuation will make the most sense for us.
  • M&A Agarwal Eye Hospital Limited (AEHL) Merger · Announced

    drive both operational and financial efficiencies through streamlined functions and faster decision making. It will enable unified capital allocation, strengthen the balance sheet to support future growth, and provide a simplified legal, regulatory, and governance framework.

    AEHL public shareholders will hold 4.6% stake in the combined entity. AHCL public shareholding will get diluted from 67.6% to 64.5%. Promoter and promoter group will hold close to 30.9% stake in the combined entity. Total share capital of the combined entity would be approximately Rs. 33.13 crores.

    The merger of Agarwal Eye Hospital Limited into Agarwal's Health Care Limited is an important strategic step in our group's journey and will drive both operational and financial efficiencies through streamlined functions and faster decision making. It will enable unified capital allocation, strengthen the balance sheet to support future growth, and provide a simplified legal, regulatory, and governance framework. In terms of the post-merger shareholding of the combined entity, AEHL public shareholders will hold 4.6% stake in the combined entity. AHCL public shareholding will get diluted from 67.6% to 64.5%. Promoter and promoter group will hold close to 30.9% stake in the combined entity. Total share capital of the combined entity would be approximately Rs. 33.13 crores.
  • Liquidity Liquidity disclosed AHCL has good amount of cash reserves at the holding company level, which is being used to fund the preferential allotment for AEHL's CAPEX.
    Since we have a good amount of cash reserves at the holding company level, we felt that the preferential allotment done at a fair valuation will make the most sense for us.

Guidance & targets

Merger

  • Merger Completion Timeline Merger · by Q4 FY27 · Medium confidence 12-14 months
    Lastly, on indicative timeline and next steps, the implementation of the transaction is expected to take around 12-14 months, subject to requisite approvals.

    — Yashwanth Venkat

What to watch in Q2 FY26

Merger approval by majority of minority shareholders

Within 12-14 months
Current Pending
Target Approval from majority of minority shareholders of both AHCL and AEHL

Why it matters

This is a critical regulatory hurdle; failure to secure this approval could delay or derail the merger.

At that point in time, we require the majority of minority approval at both the company's level.

Risks & concerns

  • Perceived unfairness of merger ratio to AEHL minority shareholders

    high

    Multiple analysts strongly criticized the proposed share swap ratio, arguing it undervalued AEHL and was detrimental to its minority shareholders.

    Analyst acknowledged

  • Potential conflict of interest in fairness opinion providers

    medium

    An analyst pointed out that the merchant bankers providing fairness opinions to AHCL had also received fees from AHCL recently, suggesting a conflict of interest.

    Analyst acknowledged

Q&A highlights

4 direct
Cost synergies post-merger Direct
See, in terms of cost synergies, Binay, the main thing is on the compliance costs. One, currently since we have two companies, in terms of the auditors, we have to have two separate auditors for both the companies. That is one major cost. Apart from that, in terms of cross-charge across both the entities, there will also be a significant reduction in tax leakage from GST perspective, two. Three is also we believe that there will be a little bit of optimization of resources once this becomes a combined entity. Also, other costs such as filing costs, etc., will also come down.

Provides specific examples of operational efficiencies and cost savings expected from the merger.

Asked by Binay Singh

Rationale for preferential issue instead of loan Direct
We believe that instead of us putting any more stress on the balance sheet at the AHCL level, we feel that this will be a better route for us to do a preferential allotment. Since we have a good amount of cash reserves at the holding company level, we felt that the preferential allotment done at a fair valuation will make the most sense for us.

Explains the funding strategy for AEHL's CAPEX and highlights AHCL's strong cash position.

Asked by Binay Singh

Fairness of merger ratio for AEHL minority shareholders Partial
No, I definitely agree with both the parts where you are saying the process, which is actually a legal process, which you have sort of used in terms of getting a fairness opinion and all of that. But we all know how those fairness opinions work because, it is all like DCF is all based on assumptions, because who knows the future, right, in what the revenues and profits are going to be? So I don't know how that all, but I am just saying that if I just look at today and take a very dispassionate perspective and just say that the revenues of the subsidiary companies are roughly 25% of the holding company, I am just doing a very basic analysis, right? ... But this one just seems, right, so that is just my perspective now.

This was the most contentious point, with the analyst directly challenging the valuation and expressing strong dissatisfaction with the proposed swap ratio.

Asked by Ankit Shah

Perceived unfairness of merger ratio and lack of growth support for subsidiary Partial
Yes, my question is like why we haven't raised any funds in subsidiary, right? I already understood one could have gone with rights issue or QIP or something like that, and could have increased growth here itself, right? And also like, why we restricted subsidiary only to, now we are saying like, okay, parent is a pan India, but who stopped it, right? So it is not like someone else stopped it, right? So, both companies are under your management only, right? So you could have grown this on pan India level basis, right?

Another analyst expressing strong concern about the fairness of the deal and questioning management's past strategy for the subsidiary.

Asked by Siddharth Chandrasekhar

Requirement for majority of minority approval for the merger Direct
Yes. Thank you, doctor. On that, the process just requires the majority of minority approval at both AHCL as well as at the AEHL level. As a process, first, we will apply to the Stock Exchange and SEBI. Post getting their clearance, we will approach NCLT. Then NCLT will convene the shareholders and creditors meeting. At that point in time, we require the majority of minority approval at both the company's level.

Clarifies the critical approval hurdle for the merger, highlighting the power of minority shareholders.

Asked by Anandha Padmanabhan

Reconsideration of the merger swap ratio Partial
So my humble request is now on behalf of all minority shareholders is that please relook into this swap ratio. That is all we can do now as a minority shareholder. It is completely unfair. I don't know what is this reasonable valuation by the category I merchant banker, this and that. So, as a minority shareholder, we can just request Dr. Adil and all the management and Board of Directors of the group to reconsider it. That is all from my side.

Reinforces the widespread dissatisfaction among minority shareholders and their call for a re-evaluation.

Asked by Anil Jain

Request for an offline meeting to explain valuation methodology Direct
So Varun, your point is absolutely fair, we are more than happy to meet with our AEHL minority shareholders offline and discuss this in detail. We can find a proper time and we can take you all through the details. You would all understand it is a fair and a very transparent process. And we are more than happy to discuss this with you in person.

Management's willingness to engage directly with AEHL minority shareholders indicates recognition of the strong dissent.

Asked by Varun Hiremath

Conflict of interest regarding fairness opinion providers Partial
And secondly, on the fairness of opinion, I would like to mention a conflict of interest that your BRLM managers of the AHCL entity have provided the fairness of opinion. So again, within one year, the AHCL company has given a large cheque of fee to both of these companies who have provided fairness of opinion. So I would actually point out a conflict of interest over there.

Raises a specific governance concern about the independence of the valuation process.

Asked by Ankur Shah

3 min read 6 chapters

Detailed narrative

Merger Announcement and Rationale

Dr. Agarwal's Health Care Limited (AHCL) announced the proposed merger of its subsidiary, Dr. Agarwal's Eye Hospital Limited (AEHL), into the parent entity. This strategic move is aimed at driving operational and financial efficiencies through streamlined functions and faster decision-making. Management highlighted that the merger will enable unified capital allocation, strengthen the balance sheet to support future growth, and provide a simplified legal, regulatory, and governance framework, reinforcing their commitment to long-term value creation for all stakeholders.

Transaction Details: Preferential Allotment

Prior to the merger, AHCL will make a preferential allotment of 1,32,827 equity shares of AEHL at a price of ₹5,270 per share, totaling approximately ₹70 crores. These funds are earmarked for AEHL's immediate CAPEX requirements, specifically for the construction of a flagship facility at Cathedral Road. Post-allotment, AEHL's total equity share capital will increase from 47 lakh shares to 48.3 lakh shares, with the promoter's holding rising from 71.9% to 72.7%, while public shareholding will dilute from 28.1% to 27.3%.

Transaction Details: Share Swap Ratio

The proposed merger involves a share swap ratio where AEHL shareholders will receive 23 equity shares of AHCL for every 2 shares held in AEHL. This ratio was recommended by independent valuers (PWC Business Consulting Services, LLP and Bansi S. Mehta Valuers, LLP) and supported by fairness opinions from SEBI-registered merchant bankers (Kotak Mahindra Capital Company for AHCL and Motilal Oswal Investment Advisors for AEHL). Management stated that this swap ratio implies a 15% premium for AEHL over its 10-day Volume Weighted Average Price (VWAP) of ₹4,554 per share.

Post-Merger Shareholding Structure

Following the merger, AEHL will be absorbed into AHCL, creating a single listed entity. AEHL's public shareholders will directly become shareholders of AHCL, holding a 4.6% stake in the combined entity. AHCL's public shareholding will see a dilution from 67.6% to 64.5%, while the promoter and promoter group will hold approximately 30.9% stake in the combined entity. The total share capital of the merged entity is projected to be approximately ₹33.13 crores.

Merger Timeline and Approvals

The implementation of the merger is expected to take approximately 12-14 months, subject to various requisite approvals. The process involves obtaining no-objection letters from stock exchanges and SEBI, followed by approval from the NCLT. A critical step will be shareholder and creditor meetings, where the scheme will require approval from a requisite majority, including the majority of minority shareholders of both AEHL and AHCL.

Analyst Concerns on Merger Ratio Fairness

Several analysts and individual investors expressed strong concerns regarding the fairness of the merger ratio to AEHL's minority shareholders. They argued that the ratio seemed 'very off' and 'unfair,' suggesting that basic financial analysis would indicate a higher valuation for AEHL. Questions were raised about the valuation methodologies used by the independent valuers and a potential conflict of interest with the merchant bankers providing fairness opinions. Management reiterated that a fair process was followed, adhering to high corporate governance standards, and offered to engage with AEHL minority shareholders offline to explain the valuation in detail.

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