HCG to divest fertility division, focuses on tightening costs,paring debt

Fertility division contributed about 6.6 percent of the HCG's consolidated revenue of Rs 978.7 crore in FY19.

December 21, 2019 / 02:31 PM IST
 
 
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Healthcare Global Enterprises (HCG), a speciality hospital chain focused on cancer care, said it plans to divest its fertility arm Milann.

HCG acquired 50.10 percent stake in BACC Healthcare in 2013, which was later re-branded as Milann. HCG got approval from the board to buy the remaining stake held by other shareholders. Milann operates eight fertility centers across Bengaluru, Delhi, Chandigarh and Ahmedabad.

The fertility division contributed about 6.6 percent of the HCG's consolidated revenue of Rs 978.7 crore in FY19. While its core cancer business grew 19.7 percent, revenue from Milann centres decreased by 3.8 percent.

"We are looking at divesting IVF (fertility division) business," said Dr BS Ajaikumar, Chairman and CEO of HCG, in an interview to Moneycontrol.

"We will become more focused on Oncology. Going forward, we should do what we are best at," Ajaikumar added.

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Along with the fertility business, HCG is also considering offloading its multi-specialty hospitals like the HCG Hospitals, Ahmedabad or converting them it into cancer centres.

HCG on December 16 announced the launch of the cancer care centre in Borivali, Mumbai. The 105 bedded centre with dedicated team of specialists in oncology will provide comprehensive diagnosis, radiation, medical and surgical oncology services under one roof.

Debt reduction plan

Ajaikumar, without elaborating in detail, said the company is considering proposals to raise funds, which could be used for repaying debt.

HCG has been making losses in last two years, on account of debt taken for expansion of network and the ramp-up period of new cancer centres, during which period the operating expenses of the centre exceeds its revenue resulting in an operating loss.

The company made a loss of Rs 24.8 crore in FY19. In H1FY20, the company made a loss of Rs 40.3 crore. The company has debt of Rs 664 crore as of September 30, 2019.

The company has 24 centres and 2,031 beds as on end of Q2FY20.  The company earns a lion share of revenues from Karnataka and Western India states of Maharashtra and Gujarat.

Ajaikumar said the healthcare provider is coming to an end of a major capex cycle, and now the focus will be on reducing debt, improving the utilization of assets, optimising costs and improving operating margins.

The company is expecting at least 5 percent cost savings by using economies of scale in procurement, enhance human resource efficiencies through shared services, increasing the mix of out-of-pocket patients compared to patients from government health schemes that pay low package rates and delayed payments.

"Oncology isn't going to go away, recession or no recession, cancer patients will be there. We are best in class. We need to keep our focus on brand and belt tightening initiatives," Ajaikumar said.
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: Dec 16, 2019 09:09 pm

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