Moneycontrol
Last Updated : Aug 14, 2018 09:33 PM IST | Source: Moneycontrol.com

Fortis Health posts Rs 52.8 crore Q1 loss; shareholders approve $1.1 bn deal with IHH

The deal now needs a go ahead from Competition Commission of India (CCI) to be consummated.

Viswanath Pilla @viswanath_pilla
 
 
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Shareholders of Fortis Healthcare approved the proposed $1.1 billion deal with IHH Healthcare on August 13. The deal now needs a go-ahead from Competition Commission of India (CCI) to be consummated.

Fortis reported its first quarter FY19 results Tuesday. It posted a net loss of Rs 52.8 crore for the first quarter ended June, impacted by continuing business challenges. The company posted a net profit of Rs 22.6 crore during the same quarter of previous year.

Following the approval, IHH can pick up a controlling stake in the cash-strapped hospital chain by initially infusing around Rs 4,000 crore for equity shares at Rs 170 apiece and subsequently initiate an open offer for an additional stake.

As per the proposal, IHH would have rights to control two-thirds of the seats on the Fortis board.

The shareholders have also voted in favour of a second proposal to declassify Malvinder Singh and Shivinder Singh as promoters of Fortis and name IHH subsidiary NTK in their place.

The Singh brothers' stake in the company has fallen to 0.80 percent from 34.43 percent in February as lenders invoked the shares pledged by them.

Now they will be included in the public shareholders' category.

The board of directors of Fortis Healthcare on July 13 unanimously approved a binding investment proposal from IHH Healthcare to invest Rs 4,000 crore by way of preferential allotment.

The allotment will take place at Rs 170 a share. Since IHH's post-acquisition stake in Fortis will exceed 25 percent, it is required to extend an offer to buy an additional 26 percent from existing shareholders at a price not less than the one at which the stake is being bought.

After the transaction and the resultant open offer go through, IHH's stake in Fortis could be anything between 31 percent and 57 percent, depending on the subscription received for the open offer.

The money infused through the Fortis-IHH deal is expected to meet Fortis' short term and long term cash requirements including acquiring assets from Singapore-based Religare Health Trust and providing an exit to private equity investors in SRL, Fortis' diagnostics arm.

More on Q1 results

Revenues from operations or total income declined 10 percent to Rs 1,042 crore in Q1FY19, compared to last year's Rs 1,156 crore.

The EBITDA margin dropped to 7.7 percent from 12.7 percent on a sequential basis.

In Q1FY19, Fortis saw the deterioration of operating metrics.

The occupancy levels decreased from 71 percent in Q1FY18 to 62 percent in Q1FY19.

ALOS (Average length of stay) declined to 3.39 days from 3.53 days in Q1FY18

The ARPOB (Average Revenue per Occupied Bed) grew to Rs 1.53 Cr compared to Rs 1.51 Cr in Q1FY18

"...the last quarter performance has been impacted severely due to the continuing challenges that the Company had been facing over the last 18 months that have led to liquidity issues which have imposed severe constraints on resources, growth initiatives, and expansion," said Bhavdeep Singh, CEO of Fortis.

"Having said that, our hospital business has started showing signs of a strong recovery during the current quarter with a significant uptick in occupancy run rate levels now exceeding 69 percent from 62 percent in Q1 FY19. We feel confident and optimistic that this upward business momentum will accelerate further and result in a progressively improving quarterly performance," Singh said.

Singh said the hospital chain is working on a slew of initiatives to improve occupancy, drive revenues and optimise costs.

"Our target would be to further grow occupancy levels in excess of 70 percent by Q4FY19 expecting to translate into a significantly better operating performance. Our diagnostics business margins have shown a steady improvement over the corresponding quarter and a healthy growth over the trailing quarter which we expect to continue," Singh added.

Shares of Fortis rose 0.86 percent to close at Rs 146.05 on BSE, the benchmark Sensex gained 0.55 percent to 37,852 points.
First Published on Aug 14, 2018 08:45 pm
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