Fortis to use proceeds from Dental Corp sale to pare debt

Fortis Healthcare will use the entire proceeds from its 64 percent stake in Dental Corporation Holdings Ltd (DC), Australia to pare debt, says Vishal Bali, Global CEO. The company's stake in DC will be sold to Bupa for 270 million Australian dollar (around Rs 1,554.36 crore) by March 2013.

The debt equity ratio is likely to decline to 0.6x from 1x currently, Bali told CNBC-TV18. Fortis had entered DC in Jan 2011 and has since added considerable value to the business growing it from 140 dental practices to 190 dental practices in Australia and New Zealand. The model, however, has remained confined to the two countries and in-spite of exploration and backing has found limited acceptance in other Fortis geographies, as originally envisaged, the company said in a press release. Also Read: Bullish on Nifty till Budget; bet on cyclicals: Alchemy Cap "The move is good for Fortis as it aligns the company with its current strategic priorities. This will help consolidate our presence as one of the fastest growing healthcare companies in the region," Fortis Healthcare Executive Chairman and Executive Vice Chairman Malvinder Singh and Shivinder Singh said. Below is the verbatim transcript of Vishal Bali's interview on CNBC-TV18 Q: Can you confirm that you are getting Rs 1,550 crore and whether it will be entirely used to pay back your debt and by how much your debt would come down then? A: The entire proceeds of this transaction are going to be used to reduce our debt. Our current net debt post the transaction is about Rs 4,600 crore. This entire proceed is going to be used to reduce that. I expect that post this transaction our debt-equity ratio will be in the region of 0.6. It is currently at about 1:1. Q: At your board meeting, you also cleared the resolution to raise further funds. What would the vehicle for that be and what are you looking to raise money for? A: Fundamentally, over the last two-three quarters we have been talking about debt reduction of the company. This is in principle approval that we have got from the board to raise capital within the company. There is no current decision that we have taken in terms of the vehicle that we will use. There are multiple vehicles which are available. Also, as per the guidelines of the regulator we have to also bring down the promoters share holdings from 81 percent to 75 percent. So all this has to get executed over the next two quarters. This board approval is in that direction. Q: What was the revenue line and the EBITDA line of the dental care business for which you got Rs 1500 crore plus? A: If I take a look at their third quarter, their revenue line in terms of September quarter, the revenue line stood at about USD 171 million and the EBITDA was about USD 27.3 million. This is as on September quarters. The business has been doing well, it has grown, we have added lot of value into this business ever since the time we entered it. But given our current priorities and our strategic direction in terms of concentrating our businesses in Asia and also to enable future growth in India, we felt that this is the appropriate time to divest our stake in this business. Q: There have been reports that you may be looking to sell your stake in Super Religare Laboratories (SRL), something that you acquired in 2011. Would you want to confirm or deny that? Is that on the cards and how soon? A: We are not selling any stake in SRL. In fact, SRL has been able to raise private equity funding. We have a potential opportunity to list SRL in the future. SRL business is doing very well. If you take a look at their quarter on quarter results, SRL has improved both its top line. It is currently sitting at about 15-16 percent EBITDA margins. So that business has actually become very healthy and is PAT positive. So currently there is no such move in the company at all.