Feb 14, 2017 07:06 PM IST | Source: CNBC-TV18

Fortis Health expects SRL demerger to be completed in 6 months

Fortis Healthcare reported a healthy set of numbers for the third quarter. The firm clocked a revenue growth of over 10 percent compared to the corresponding quarter last fiscal.

The demerger of Fortis Healthcare's diagnostic business should be completed in the next six months, said Bhavdeep Singh, CEO of the company. The demerger, which will shift the dignostic business into its subsidiary Fortis Malar, was approved six months ago.

Singh said the company's revenues grew last quarter despite the effects of demonetisation. The company also grew due to a one time gain from FHTL's transactions.

Fortis Healthcare reported a healthy set of numbers for the third quarter. The firm clocked a revenue growth of over 10 percent compared to the corresponding quarter last fiscal. Fortis also reported a profit of over Rs 450 crores versus a loss of around Rs 30 crore year-on-year.

Below is the transcript of Bhavdeep Singh's interview to Ekta Batra on CNBC-TV18.

Q: What seems to stand out is this earnings before interest, taxes, depreciation and amortisation (EBITDA) growth of around 147 percent, margins expanding almost 600 basis points this quarter and that seems to be aided by this transaction that you completed with Religare Health Trust (RHT). Can you just take us through that particular transaction whether we are going to see any more as well as a gist of your numbers this quarter?

A: Let me start with the overall numbers. The country has gone through a big challenge with demonetisation and like everybody, we have all gone through it and I am pleased to report that with demonetisation withstanding, that we are reporting very solid numbers. Our Fortis Healthcare revenue has grown at 10 percent, the SRL business, the revenue has grown by 10 percent. So, good healthy revenue growth despite the challenges that might exist out there right now.

To your point, we do show a one-time gain which is a result of the Fortis Hospital Limited (FHTL) transaction which you are aware of. And fundamentally, while the business has done well and I will talk more about that in a minute, essentially what has happened is that, you will recall that we acquired 51 percent of the transaction that we concluded just recently. We own 30 percent of FHTL and the 30 percent stake of the purchase price, plus the appreciation in the purchase price and the balance 49 percent which was reappraised, 30 percent of that is what has contributed to this non-cash drop to the bottom line.

Having said that, in addition to that, while we have the one-time gain certainly which is good, we have also seen the business do quite well. I just mentioned the fact that the revenue at Fortis Healthcare has grown by almost 9 percent. We have had good solid occupancy over 70 percent. And with all the challenges that we have had with demonetisation, the organisation has just done a tremendous job in making sure we take care of our patients. We are very pleased to share that during this entire time with this uncertainty that took place that we did not turn away one single patient. Our OPDs were open, we had free internal medicine OPDs that we had going. So, net-net some good stuff happening inside Fortis Healthcare. The numbers are good and we are very encouraged by where we are and look forward to continued good strength and growth going forward.

Q: You are still in the process of the demerger of the diagnostic business. Can you give us a sense in terms of where that stands, when would the restructuring be complete and is that also contingent on a possible deal which is in the pipeline with private equity companies at this point and if you could confirm what is happening on that front? Is TPG Capital still the front runner despite the to and fro in court?

A: Let me take one at a time. The demerger is very much on track. You will recall that we announced the demerger several months back and there is a complex process as you can imagine. We have filed our papers in Mohali in Punjab and we believe that that is on track. We see the demerger completing sometime in the next months or so. So, very much on track. We think it is good for the business, we think it is good for SRL and that certainly is moving forward.

On the other piece that you have referenced quite honestly, we cannot really comment on anything right now. I can tell you that any organisation, we have taken the approval to raise capital. Any organisation at any time looks at their financial structure, looks at what is the best way to go to market and as any growth organisation would, we are exploring our opportunities, but quite honestly, there is nothing to comment on at thi8s time. We are exploring options and as and when something comes forward, we will certainly be happy to share more at that time.

Q: There was quite a hallmark event that took place today where stent prices are now going to be under the purview of the National Pharmaceutical Pricing Authority (NPPA) and there is a cap put on stent prices. There were some reports indicating that that could even impact hospitals because their sales of stents, in terms of value at least, would go down. Your sense in terms of the significance of this event and whether there would be any impact on hospital sales at all.

A: Let me start by saying first that we think in the long-term anything we can do to increase the access for patients to good quality healthcare, we support. We are in the business of healing patients and anything that improves the access, gives more patients the opportunity to get quality healthcare, we are certainly behind and we endorse and we support and we applaud.

With respect specifically to the stent issue, it is early. This news is out while there has been lots and lots of speculation, it is still 24 hours old at best and we are assessing the various, if there is going to be an impact, if it will be, how significant. But net-net, we are working, we are going to continue to work with our doctors, with our hospitals to make sure that we are doing the right thing. We always make the best possible care available. We are looking at the stent specific piece. We are working with the manufacturers to understand how best do you transition from where you are to what we need to do going forward.

But, I will tell you what, let us talk in 10 days-two weeks and maybe I can share a little bit more. Right now, a bit preliminary, but net-net probably good overall for India and we support it and we will do the best thing going forward.
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