Transaction:
- Fortis Healthcare Ltd has announced that it has agreed to sell Fortis Malar Hospital (known as Malar Hospital) in Adyar, Chennai, and adjacent land parcels to MGM Healthcare Pvt. Ltd for a sale consideration of about Rs. 128 Crores.
- The transaction comprises the following parts:
- The divestment of the business operations pertaining to Fortis Malar Hospital residing in the listed subsidiary of the company, Fortis Malar Hospitals Ltd, in which Fortis Healthcare owns a 62.7% equity stake will be sold for Rs 45.50 Crores.
- There is an adjacent land parcel and another vacant land, which will be sold for around Rs 35 Crore.
- Further, the deal includes the OPD and radiology business operations of Fortis Malar Hospital (including the land and building where the hospital is situated) and the land parcel adjacent.
- These assets, part of Fortis Health Management (Fortis Healthcare’s subsidiary), will be sold for over Rs 47.59 Crore.
- The transaction will be an all-cash deal and is expected to be consummated by the end of January 2024.
About Fortis Healthcare Limited:
- Incorporated in 1996, Fortis Healthcare’s first facility became operational in Mohali, Punjab in 2001.
- Currently, Fortis operates 27 healthcare facilities (including JVs and O&M facilities). The Hospital’s network comprises approximately 4,300 operational beds and 400 diagnostics centres.
- On February 15, 2018, the shareholding of the erstwhile promoters (Singh Brothers), reduced to less than 1% after the Supreme Court intervention.
- IHH became the new promoter, investing around Rs 4,000 Crore in the company against fresh issuance of around 31.1% stake.
About MGM Healthcare:
- Two Decades old and reputed, MGM Healthcare’s flagship Mahatma Gandhi Medical College and Research Institute and Sri Balaji Vidyapeeth (Deemed to be University).
- MGM Hospital is a state-of-the-art, super-specialty hospital in the heart of Chennai city in India, with 400 beds with 100 ICU beds.
Rationale:
- The company added that the Fortis Malar hospital divestment is part of its portfolio rationalization strategy to ramp up presence in select geographic clusters. Fortis Healthcare had in July divested business operations in its Vadapalani facility in Chennai.
- Fortis said that this was their second under-performing asset divestment in the last 2 quarters.
- The Malar Hospital has been facing certain legacy issues. Over the past few years, with continuous efforts, several of these issues have been resolved. However, some of the legacy aspects continue to persist which have given rise to certain challenges for the Company and have constrained further investments into the facility. The matter has accentuated the need for the Company to divest itself business as a viable and prudent option for its stakeholders.
- MGM Healthcare said that they have been investing in both Greenfield and existing facilities as a part of their long term growth and nation-wide expansion plans. With this acquisition MGM Healthcare now has Approx. 800 Beds in Chennai.
- Fortis Malar Hospital saw a slight decline in revenues to Rs. 85.95 Crore during FY23, against Rs. 86.18 Crore in FY22. The hospital continued to make losses for FY23, the loss stood at Rs. 7.01 Crore and loss for FY22 was Rs 8.26 Crores. While EBITDA (earnings before interest, tax, depreciation, and amortization) saw a 3.51 per cent improvement to Rs. 11.21 Crore in FY23 compared to Rs. 10.83 Crore in FY22.
- Indian healthcare Industry is witnessing consolidation that can be seen in the recent hospital deals that include Manipal Hospitals acquiring 84% stake in AMRI Hospitals for Rs 2400 Crores, Fortis acquiring Gurugram-based Medeor Hospital for Rs 225 Crore, Temasek Holdings buying a majority stake in Bengaluru-based Manipal Health Enterprises for over $2 billion, Marengo Asia Healthcare acquiring W Pratiksha Hospital, Gurugram.
Acknowledgements:
RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
Disclaimer:
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