1. Corporate information
Fortis Malar Hospitals Limited (the Company) was incorporated in the
year 1989 to set up, manage and operate a multi specialty hospital and
it commenced its commercial operations in the year 1992. The Company is
a subsidiary of Fortis Hospitals Limited.
2. Basis of preparation
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on an accrual basis and under the
historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those of previous year, except as given
Terms/ rights attached to equity shares
The Company has only one class of equity shares having par value of Rs.
10 per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividends in Indian rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
b - Security/ Guarantee against long term borrowings
The loan is secured by sole and exclusive charge on all fixed assets
and current assets both present and future, including land and
building, medical assets and plant and machinery.Further, the loan is
secured by corporate guarantee of International Hospitals Limited.
c - Repayment Terms of the long term borrowings
Repayment in respect of the loan outstanding of Rs. 23.60 million is 36
Repayment in respect of other loans is 60 monthly instalments to
commence after 12 months principal moratorium from disbursement of each
tranche. Interest to be serviced monthly.
2 Proposed sale of Hospital Infrastructure Undertaking
The Shareholders of the Company have approved vide resolution dated
July 18, 2011, the transfer / sale / disposal of Hospital
Infrastructure Undertaking including Out Patient Department business
and radio diagnosis equipments (''Hospital Infrastructure Undertaking'')
on a Going Concern Basis through slump sale to any one of the
Affiliates / Group Company / Companies under the same management for a
consideration of an amount not less than Rs. 600,000,000. On February 7,
2012, the Company has signed a Term Sheet with Fortis Health Management
Limited (''FHML''), one of its group companies expressing intent to sell
the Hospital Infrastructure Undertaking and proposed to enter into an
exclusive and irrevocable Business Transfer Agreement effecting the
transfer at a later date not exceeding six months from the date of the
Term Sheet. The Company has also received an advance of Rs. 650,000,000
on February 7, 2012 towards the proposed transfer. The Company is in
the process of taking necessary steps to execute the transfer. The
Company has temporarily invested this amount as inter corporate deposit
and has earned an interest of Rs. 9,616,439. The Company is still in
discussion with FHML regarding finalizing the valuation for the
transaction and other terms and conditions including the arrangement to
lease back the infrastructure post the proposed transfer.
3 Management fee from Hospitals
During the current year, the Company has received management fee from
two hospitals with which the Company had entered into operation and
management agreements aggregating to Rs. 19,125,440. Of the above, one
agreement has been terminated during December 2011 and the other
agreement subsequent to the year end in April 2012.
4 Segment reporting
The Company is engaged in providing health care services, which in the
context of Accounting Standard 17 (Segmental Information) is considered
as the only business segment. Accordingly, no separate segmental
information has been provided herein.
Secondary Segment - Geographical Segment.
The Company primarily operates in India and therefore mainly caters to
the needs of the domestic market. Therefore, there are no reportable
5 Capital and other commitments
At March 31, 2012, the Company has capital commitments of Rs. 1,075,617
(Previous year Rs. Nil) towards purchase of assets.
6 Contigent Liabilities
2012 March 31,
Claims against the Company not
acknowledged as debts 72,323,252 3,223,252
(in respect of compensation demanded
by the patients / their relatives
for negligence). The cases are pending
with various Consumer Disputes
Based on expert opinion obtained, the management believes that the
Company has good chance of success in these cases.
7 Deferral/capitalization of exchange differences
The Ministry of Corporate Affairs (MCA) has issued the amendment dated
December 29, 2011 to AS 11 The Effects of Changes in Foreign Exchange
Rates, to allow companies deferral/ capitalization of exchange
differences arising on long-term foreign currency monetary items.
In accordance with the amendment/earlier amendment to AS 11, the
company has capitalized exchange loss, arising on long-term foreign
currency loan, amounting to Rs. 3,033,591 (March 31, 2011: Exchange gain
Rs. 151,025) to the cost of plant and equipments.
The Company has a defined benefit gratuity plan, whereby the employees
are entitled to gratuity benefit on the basis of last salary drawn and
completed number of years of service.
The Company also provides leave encashment benefit to employees, which
is unfunded. The Company also provides superannuation benefits to its
The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion and other
related factors, such as supply and demand in the employment market.
The company expects to contribute Rs. 1,600,000 to gratuity in the next
year (March 31, 2011: Rs. 638,000).
The fund is 100% administered by Life Insurance Corporation of India
(LIC). The overall expected rate of return on assets is
determined based on the market prices prevailing on that date,
applicable to the period over which the obligation is to be settled.
Amounts for the current and previous four periods are as follows:
4 Employee stock option plans
The Company provides share-based payment schemes to its employees.
During the year ended March 31, 2012, an employee stock option plan
(ESOP) was in existence. The relevant details of the scheme and the
grant are as below.
Malar Employee Stock Option Plan 2008 (Scheme) was approved by the
board of directors of the company on 31st July 2008/28th May 2009 and
by shareholders in the annual general meeting held on 29th September,
2008 /21st August 2009. The following are some of the important
conditions to the scheme:
- 25% of the option shall vest on the completion of 12 months from
the grant date.
- 25% of the option shall vest on the completion of 24 months from
the grant date.
- 25% of the option shall vest on the completion of 36 months from
the grant date.
- 25% of the option shall vest on the completion of 48 months from
the grant date.
There shall be no lock in period after the options have vested. The
vested options will be eligible to be exercised on the vesting date
itself. Notwithstanding any provisions to the contrary in this plan the
options must be exercised before the end of the tenure of the plan.
The plan shall be deemed to have come to in force on the 21 August 2009
or on such other date as may be prescribed by the board of directors of
the company subject to the approval of shareholders of the company in
The weighted average remaining contractual life for the stock options
outstanding as at 31 March 2012 is 4.75 years (31 March 2011: 5.75
years). The range of exercise prices for options outstanding at the end
of the year was Rs. 10. (31 March 2011: Rs. 10.)
The weighted average fair value of stock options granted during the
year was Rs. 13.45 (31 March 2011: Rs. 13.45). The Black Scholes valuation
model has been used for computing the weighted average fair value
considering the following inputs:
The expected life of the stock is based on historical data and current
expectations and is not necessarily indicative of exercise patterns
that may occur. The expected volatility reflects the assumption that
the historical volatility over a period similar to the life of the
options is indicative of future trends, which may also not necessarily
be the actual outcome.
9 Operating lease payments
Operating lease agreements have been entered in to by the Company with
respect to office premises and medical equipments. The total lease
payments made during the year are as follows:
10 There are no overdue amounts payable to Micro and Small Enterprises
as defined under the Micro, Small and Medium Enterprises Development
Act, 2006 based on information available with the Company. Further, the
Company has not paid any interest to any Micro and Small Enterprises
during the year ended March 31, 2012 and year ended March 31, 2011.
11 The figures of previous year were audited by a firm of Chartered
accountants other than S R B C & Co. Previous year''s figures have been
regrouped where necessary to conform to the current year''s