No new hopitals in near future, will spend on R&D: Fortis CEO

Fortis Healthcare released its third quarter result on Thursday. The company reported mixed set of numbers as it saw a consolidated net loss of Rs 55.2 crore but also a gain of 1.6 percent in consolidated revenue to Rs 1041 crore.

In an interview with CNBC-TV18, Bhavdeep Singh, CEO of Fortis said that there are no plans to add new hospitals in the near future but the company will spend majorly on medical equipments and technology.Below is the transcript of Bhavdeep Singh’s interview with CNBC-TV18's Nayantara Rai. Q: Can you provide us any guidance, what kind of growth we can expect from Fortis Healthcare? A: In this past quarter we experienced a revenue growth of about seven percent and that was really light actually because as you are aware India generally with the festival season in Diwali time we take a bit of a dip. You can imagine that people think about planned surgeries or having hospitalisation, they delay, they postpone. So, generally speaking the third quarter number is a soft number for many of us and it was no different this year. So 6-7 percent but our annualised number is sitting at about 10 percent and we certainly think that will continue for the foreseeable future. On an earnings before interest, taxes, depreciation and amortisation (EBITDA) perspective we continue to grow slightly better than last year. As you rightly mentioned the numbers have been impacted quite significantly by the exceptional loss which is a onetime hit and we continue to be very optimistic about where we are. Our occupancy rate continues to be north of 70 percent which is one of the better numbers in the industry. So, as we go forward we continued our march towards profit after tax (PAT) positive and all indicators seem to be in the right direction. Q: We thought that your business that you are in would be recession proof, that it would not be seasonal either. People fall ill, they are going to have to avail of healthcare services but you are saying that the performance has been impacted because of a seasonal reason. The other question I wanted ask you was that, like you said, you admitted that the growth has been thin, there is an exceptional loss at Rs 32.1 crore. What is your debt like in your books? Can you give us an idea also of any capital expenditure (Capex) that you want to incur? A: Just to go back to your comment. I think the whole seasonality is merely a function of that when you plan something, given a choice, you would rather do it when it is not the festival season or holiday season. So, it is not an anomaly, this is what happens every year. From a debt perspective, we are sitting at a fairly comfortable number. We are sitting at about Rs 1,400-1,500 crore. It is a number that we are comfortable with, we seem to have managed quite well. We are continuing to invest in our hospitals. Our annual Capex number, we look anywhere between Rs 150-200 crore and we are investing primarily in medical equipment, medical technology and again, it goes back to what we do best, which is take care of our patients. Q: Are you going to be adding new beds, are you adding new hospitals in the new fiscal? A: No, we are sitting at 4,500 beds, and at this stage, while we explore some operation and maintenance (O&M) agreements, we are not actively looking at new hospitals, we continue to look at growth opportunities within the four walls of Fortis, because we have lots if space. We are sitting at 4,500 beds, but we can easily become 7,000-9,000 beds in the next few years without adding a single hospital. So, growth primarily will come organically and that is a good way to go for us because it reduces the capital investment required. The other thing that I just want to mention – I am sure you are aware that we have acquired 51 percent economic interest in Fortis Hospital Limited (FHTL) move. We feel very good about that and while there are lots of numbers that support that, lots of business logic behind it, the net of it is that it improves our EBITDA by Rs 200 crore and puts Rs 50 crore on the PAT line. So, good move and we feel good about that as well.

(Copy edited by Sidhartha Shukla, interview transcribed by Binu Panicker)