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BW Businessworld

Divide, Prosper

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India's biggest corporate hospital chain Fortis Healthcare is restructuring, again. Months after it acquired the privately-held international hospital business of its promoters — brothers Malvinder and Shivinder Mohan Singh — for Rs 3,720 crore, Fortis is now splitting the operations of the integrated entity into two divisions and diluting its stake in one of the divisions to raise about Rs 2,000 crore. The aim is to bring down acquisition-related debt.

Fortis's current debt burden is about Rs 5,000 crore, including the cost of acquiring the Singapore-based entity. The two new divisions will be — Clinical Establishment Division (CED) and Medical Services Division (MSD). CED will own the immovable assets while MSD will provide healthcare services using these assets. CED will be shifted to a new entity, Religare Health Trust (RHT). Fortis will dilute two-thirds of its stake in CED by bringing in foreign investors. There will be a steady flow of revenues from MSD to CED through service contracts. "This allows the company to de-leverage its balance sheet," says Vishal Bali, group CEO, Fortis Healthcare.

To begin with, Fortis will move 16 hospitals, including four greenfield projects, into CED. Bali says RHT will acquire assets outside the Fortis universe and abroad. The company is yet to disclose which hosptials will be moved into CED. It owns, operates and is in the process of turning operational (greenfield projects in various phases of completion) a total of 68 small and big clinical establishments in India.

The company's board has given an in-principle approval for the listing of RHT on the Singapore exchange's securities trading platform. RHT has obtained conditional eligibility for the listing on 24 May.

IMMOVABLE ASSETS: The Clinical Establishment Division will own these. Also, it will come under a new entity, Religare Health Trust

SERVICES: These will be under the Medical Services Division, which will provide healthcare services

DEBT: The current debt burden is about Rs 5,000 crore

In the January-March period, Fortis completed the integration of its acquired international businesses and Indian operations. In the process, it overtook Apollo Hospitals to become the largest corporate healthcare player in India. Its revenue was Rs 2,983 crore during the year ended 31 March 2012, twice the Rs 1,491 crore registered the previous year.

Bali says the annual results may not reflect the revenue potential of the group as the international revenues, which contributed almost 50 per cent, were not there in the first three quarters of the 2011-12 period. "Our consolidated global revenue for the January-March 2012 quarter was Rs 1,279 crore, compared to Rs 412 crore the previous year," he says.

Fortis has also restructured its supply chain business to make it more cost effective. "We have created a global supply chain organisation based in India. It will help us leverage the advantages of global sourcing of consumables, medical technology and equipment," says Bali.

Anticipating the restructuring, Fortis has already registered a slew of companies to undertake dedicated "medical" and "healthcare management" services. Fortis Health Management (South), Fortis Health Management (East), Fortis Emergency Services, etc., are some of them.

The company says it is diluting its stake in the core hospital business to not only attract funds but also focus on "servicing patients".

(This story was published in Businessworld Issue Dated 11-06-2012)