It's the season of rejigs, and healthcare giant Fortis is the latest to announce its plans to rework the entire business holding structure. The company board approved demerger of its diagnostics business into another group firm Fortis Malar Hospitals.
The move is aimed at ensuring independent growth of hospital as well as diagnostics business verticals. As part of the process, Fortis Malar will sell its hospital business to Fortis Healthcare in a lump-sum cash consideration of Rs 43 crore.
The name of Fortis Malar will subsequently be changed to SRK. CNBC-TV18's Varinder Bansal caught up with Bhavdeep Singh, CEO, Fortis Healthcare, to get more details.
Below is the verbatim transcript of Bhavdeep Singh's interview to Varinder Bansal on CNBC-TV18. Q: What would be the debt position after the deal? A: There is no debt there. There was no debt in the existing entity that was there, there is no existing debt in the SRL business that is going to get transferred over as well, so I think they start off on a very solid footing, zero debt, fantastic brand and the opportunity to become an independent entity and do great things and continue to grow as we go forward. Q: Is there any advantage of reverse merging the diagnostic business into Malar or the case could have been you demerged the SRL business and listed separately and nothing to do with Fortis Malar. I am sure there might some advantage for reverse merging it? A: There is a couple of things for us, one is again the simplification perspective we are sticking to two entities. We bring the hospital and we are buying the Fortis Malar Hospital and bringing it into the Fortis entity, so I these transactions are complex enough, they involve enough time, enough diligence to get them done. I think we just try to take a simple approach that brings the entire diagnostic business together and bring the hospital business together and in retrospect it’s been a while that we have chosen. Q: The current market cap of Fortis is nearly Rs 9,000 crore, so are we right in assuming that the valuation of SRL could be anywhere between Rs 4,500 crore to Rs 5,000 crore under this complex restructuring?
A: I think the valuation piece will come as we work through this, this transaction is going to take anywhere between 9-12 months to complete. I don’t think at this time it would be wise to comment on what the valuation might be.
Suffice to say that if you look at the two independent businesses in light of what we have seen with other diagnostic businesses, the value that they have created -- suffice to say that for a shareholder is that you are going to have a solid business in Fortis. I think you are going to get a fantastic opportunity with 0.98 share for every 1 you have. I certainly think that going forward it will unlock value in multiple ways and again the valuation piece we will be able to discuss as we go further and deeper into the understanding of this.
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