Fortis Healthcare Plans To Restructure Its Business

Fortis Healthcare, which has a market cap of Rs 4,015 crore, is seeking its shareholders’ consent for a business restructuring deal. The restructuring deal, as of now, appears to be quite complicated and needs more explanation from the company. Under the internal corporate restructuring deal, Fortis Healthcare will split the business of certain hospitals into two different entities. 

These entities will be named as Clinical Establishments Division and Medical Services. The Clinical Establishments Division will own, maintain and operate clinical establishments, day care and outpatient healthcare and medical services. The Medical Services Division will undertake the business of running the hospitals and providing in-patient medical services. It is not clear which hospitals will be covered under the restructuring deal. Besides, the revenues of these hospitals are not known. The published document also does not make a mention about how and why certain hospitals have been selected.

According to a company statement filed with the stock exchange, the restructuring deal will help the company to concentrate more on its core business of medical services. The Clinical Establishments Division will have the ownership of eight different subsidiaries of the company. In order to raise long-term capital, the company has also proposed to list the Clinical Establishments Division on Singapore’s stock exchange. After this IPO, the shareholding of the company in this particular division will get diluted to 76 per cent. Through this IPO the company intends to garner between S$ 400-550 million (Rs 1,767-2,430 crore). The proceeds of this IPO will be used to repay its debt as well the debts of the parent company and subsidiaries as a consideration of state transfer.

Fortis has recorded a consolidated debt of over Rs 6,511 crore till March 2012. The debt has mainly increased in the last fiscal. In FY12 the company made a net profit of Rs 72 crore which was 41 per cent less than posted in FY11. The company is seeking the shareholders’ nod for this restructuring deal through postal ballot by July 12, 2012. The result of the same will be available on the next day i.e. July 13, 2012. We have currently no opinion on this deal as there is no analytical information available other than the deal information. The shares of the company closed 0.15 per cent up to Rs 99 on the BSE. On an YTD basis the shares are up by 18 per cent while from 2011 it has lost nearly 32 per cent.