The past few months have been troublesome for Fortis Healthcare Ltd. In a late night announcement yesterday, the hospital chain said that its board has approved demerger of hospital business. As part of the deal, the hospital business of Fortis along with a 20 per cent stake in diagnostics chain SRL will be acquired by Manipal Hospitals and private equity investment firm TPG Capital.
“The merger will take time. The merging of Fortis into Manipal will take between 10 to 12 months,” FHL CEO Bhavdeep Singh said in a conference call on Wednesday.
Only last month, the promoters – Malvinder Singh and Shivinder Singh – stepped down from the board of Fortis and diversified financial services firm Religare Enterprises. The Singh brothers quit following reports that the duo had allegedly taken Rs 473 crore from their publically listed company without the board approval.
In a statement on Tuesday, Fortis said, “As part of the proposed transaction, Dr Ranjan Pai and TPG will invest Rs 3,900 crore into Manipal Hospitals. The funds will be utilised by Manipal Hospitals to finance the acquisition of 50.9 per cent stake in SRL (20.0 per cent from FHL and 30.9 per cent from other investors for which discussions are currently underway).”
“The Board has also approved sale of its 20 per cent stake in SRL Ltd. to Manipal Hospitals. The resultant entity Manipal Hospitals will be a publicly traded company listed on NSE and BSE. The remaining FHL will be an investment holding company with 36.6 per cent stake in SRL,” it added.
Fortis demerger comes at a time when Serious Fraud Investigation Office (SFIO) is reportedly initiating a probe into alleged financial irregularities at Fortis Healthcare and Religare Enterprises. When asked about the investigations by Serious Fraud Investigation Office (SFIO) in the company over alleged financial irregularities in the company involving its promoters, Singh brothers, Bhavdeep Singh said: “We are cooperating with the ongoing SFIO investigations.”
Earlier, Deloitte, Haskins & Sells LLP, had red-flagged the Fortis Healthcare Ltd’s financial results. Deloitte, in fact, said that it has not performed an audit.
The Delhi High Court had on January 31 upheld an international arbitral award of Rs 3,500 crore passed in favour of Japanese pharma major Daiichi Sankyo, which had alleged that the former promoters of erstwhile Ranbaxy Laboratories had concealed information about proceedings against them by the US Food and Drug Administration.
The Singh brothers issued a statement on the demerger of Fortis’ Hospital business into Manipal Hospitals. The move, they said, “will unlock significant value for all stakeholders and will further accelerate and expand access to high quality healthcare services in India. We are happy and confident that the combination will be value accretive for all stakeholders.”
Referring to the growth of Fortis though not about its scale down, especially of its international operations, the Singh brothers said, “for over a decade and a half, we have committed to expanding and building India’s leading healthcare organisation which delivers best-in-class infrastructure and world-class care to its patients. From a humble beginning with one hospital in 2001, Fortis has grown to become a national healthcare provider in a rather short span of time, owing to the relentless dedication of the Fortis family.”
Shares of Fortis Healthcare tumbled nearly 11 per cent today after the company said its board had approved demerger of its hospitals business. The stock, after making a weak opening, cracked 9.96 per cent to Rs 128.25. On NSE, shares of the company plunged 10.57 per cent to Rs 127.20.businesstoday