February 03, 2012

Stock : Fortis ~ Sector : Pharma

Source : Economic Times

• Fortis Healthcare, the country’s largest hospital company, plans to hive off its non-core business and related assets into a separate company that is likely to be listed on the Singapore Stock Exchange as a business trust to raise $300 million Rs 1,500 crore).
• The proposed restructuring exercise is aimed at unlocking value from its non-core businesses, said two persons familiar with the development.
• The transaction would release significant amount of cash for Fortis Healthcare, which in turn will be used for de-leveraging the balance sheet and also to fuel its growth in the future.
• The move is also a part of the company’s strategic shift to focus on high margin businesses in the future, said one of the persons.
• “The company is in the process of finalising the structure of the new entity and expects the restructuring exercise to be completed by middle of next month,” he added.
• Fortis spokesperson declined comment. Fortis Healthcare, promoted by billionaire brothers – Malvinder Mohan Singh and Shivinder Mohan Singh – would first hive off these noncore businesses and related assets into a wholly-owned subsidiary for a cash consideration. Subsequently, the business trust will raise Rs 1,500 through an IPO on Singapore Stock Exchange.
• It is expected to hit the market in May or June this year. The actual amount to be raised will depend upon the market sentiment prevailing at that time. Fortis Healthcare will continue to own majority stake in the new entity after the IPO, said another person.
• “The company may use the entire proceeds from the IPO to reduce its current debt of Rs 4,000 crore or part of it may be kept aside for funding future acquisitions,” the person quoted above said.
• Though the detail of the business verticals that will be hived off are yet to be finalised, they are likely to include radiology, house keeping, food and beverage, among others. Immovable assets owned by the company could also be demerged.
• “Currently, a huge amount of the management’s time is being spent on these non-core activities, which normally are outsourced. Going forward, the management will focus more on critical areas that not only offer tremendous opportunities but are also more time-demanding,” he said.