IHH Healthcare acquired a 31% stake in Fortis Healthcare in August 2018, paying $1.1 billion. However, it has not succeeded in making a mandatory open offer to acquire a 26% stake due to a Supreme Court stay order
Mitsui & Co, IHH Healthcare’s largest shareholder, said it is committed to continue executing the turnaround plan for Fortis Healthcare, while exploring further investments in the Indian healthcare sector.
“IHH has grown successfully across Asia and we are therefore confident that it will grow its healthcare business in India,” Koji Nagatomi, Mitsui’s Executive Managing Officer and Country Chairperson in India, told Moneycontrol in an email interview.
“IHH will continue to execute the turnaround plan for Fortis and we hope to see the positive results continue and deliver a significant quantitative and qualitative improvement in the provision of healthcare services in India,” Nagatomi said.
IHH Healthcare is one of the larger investors in the Indian private-hospital space, with controlling stakes in Global Hospitals and Continental Hospitals.
The acquisition of Fortis, however, has been its single biggest bet in India. IHH Healthcare acquired a 31 percent stake in Fortis Healthcare in August 2018 by paying $1.1 billion in a bidding process overseen by an independent board. However, it couldn't make progress on its mandatory open offer to acquire a 26 percent stake due to a Supreme Court stay order.
The apex court blocked the open offer on a plea filed by Japanese drugmaker Daiichi Sankyo, which is trying to enforce a Rs 3,500 crore arbitration award it won in a Singapore tribunal against Fortis’ erstwhile promoters, brothers Malvinder Singh and Shivinder Singh.
Biggest shareholder in IHH Healthcare
Three months after IHH Healthcare’s successful bid to acquire Fortis, its own shareholding underwent a significant change. Malaysian sovereign fund Khazanah Nasional Berhad, which was its largest shareholder, sold a 16 percent stake to existing investor Mitsui, making the Japanese trading company the biggest shareholder in IHH.
Mitsui now has a 32.9 percent shareholding in IHH Healthcare.
“Although IHH is an independent management company, through Board representation, Mitsui acts as a steward and provides strategic guidance to IHH, enabling us to drive the growth of the largest hospital group in Asia,” Nagatomi said.
On reports about Mitsui reaching out to Daiichi Sankyo to insulate IHH Healthcare from the ongoing litigation, Nagatomi declined to comment, citing the litigation. “As it is an ongoing litigation and this is a question for IHH/Fortis, we cannot comment,” Nagatomi said.
Mitsui's other current investments in the Indian healthcare and pharmaceuticals market include Keimed, one of the largest pharma distributors in India, in which it had invested in 2015, and GOQii, a smart preventive health platform, in which it invested in 2018.
“We view the Indian healthcare market as highly attractive — particularly the private hospital sector, which accounts for 80 percent of the total healthcare market in India — due to its significant growth rate of around 16-17 percent (CAGR),” Nagatomi said.
Nagatomi also said Mitsui's interests in India go beyond healthcare.
“India represents a very interesting market for Mitsui and one in which we have made investments across various industries, including F&B, renewable energy and electric vehicles,” Nagatomi said.
Mitsui employs over 13,000 people (including temporary staff) in India, with investments totalling more than JPY 34 billion as of March 31, 2020.“We plan to continue to invest in India’s growth and development by taking a holistic approach across multiple sectors where we see growth opportunities due to social and industrial mega-trends,” he added.