ICRA puts Fortis Healthcare debt ratings on watch after Rs503 crore penalty by Delhi govt

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Hyderabad: Ratings agency ICRA Ltd on Wednesday placed the long and short-term debt ratings of Fortis Healthcare Ltd under watch following the imposition of a penalty of Rs.503 crore by the Delhi government on Escorts Heart Institute and Research Centre Ltd (EHIRCL), a subsidiary of the hospital chain.

ICRA said the A+ rating assigned to Rs.250-crore non-convertible debentures programme and Rs.200-crore fund-based limits of Fortis were put on watch with “developing implications”. The short-term rating A1+ assigned to the company’s Rs.1,000-crore commercial paper was also put on watch.

Fortis said on 10 June that it received an order from the Directorate General of Health Services (DHS) of the Delhi government to deposit Rs 503 crore for alleged non-compliance with conditions of lease of land allotted in 1982. Fortis said it will challenge the government order.

The fine was imposed after the Delhi high court set up a committee to compute the notional loss to the government caused by violation of the land allotment agreement wherein free treatment, up to a predetermined limit, had to be provided to poorer patients.

Fortis was given time till 9 July to deposit the amount.

ICRA said the company is expected to file a petition by the first week of next month.

ICRA will continue to monitor the development closely and assess its impact on the credit risk profile of the company once more clarity emerges on the issue, the ratings agency said.

Shares of Fortis dropped 1.32% to close at Rs.160.80 on the BSE on a day the benchmark Sensex declined 0.18% to end at 26,765.65 points.