The merger deal between TPG-backed Manipal Hospitals and Fortis’ hospital division announced late Tuesday evening is valued at Rs 15,000 crore and would take about 9-12 months for completion, company officials have said. “When you take into account the value of Fortis Hospitals and Manipal Hospitals and the money being infused by the Manipal Group, the deal value adds up to Rs 15,000 crore,” explained Bhavdeep Singh, CEO, Fortis Healthcare Ltd at a media telephonic conference on Wednesday.
Singh also emphasised that the Fortis group was stepping away from its promoters — Malvinder Singh and Shivinder Singh — who are the focus of multiple probes by the Serious Fraud Investigation Office and the Securities and Exchange Board of India (SEBI). He indicated that the Singh brothers may cease to be promoters of the company. “We appreciate the strong brand that the Singh brothers have built, but Fortis needs to go its own way. The new step we take for Fortis would be a step without the promoters,” he said.
The stake of the Singh brothers in Fortis has been reduced to less than 1 per cent and they resigned from Fortis Healthcare’s board earlier this year. “They are technically the promoters, but that might change as well,” Singh said. The ongoing investigations against the company by the SFIO and SEBI are likely to be over by the time the transaction is complete, which could take anything between three quarters to a year, Singh said. However, he clarified, that the completion of the deal is not contingent upon the conclusion of the ongoing investigations.
SFIO is probing reports of financial irregularities at Fortis Healthcare and Religare Enterprises, which allegedly involve Malvinder Singh and Shivinder Singh. The capital markets regulator SEBI is looking into related party transactions and alleged corporate governance lapses in the Fortis group companies.
Under the deal, Manipal Hospitals Enterprises Pvt Ltd, promoted by Ranjan Pai of the Manipal Group, and private equity biggie, TPG Capital Asia, would infuse Rs 3,900 crore of fresh capital into the venture. “The board (of Fortis Healthcare) 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 the NSE and BSE. The remaining FHL will be an investment holding company, with 36.6 per cent stake in SRL,” according to an official release.
As part of the proposed transaction, the Rs 3,900 crore invested by Ranjan Pai of the Manipal Group and TPG into Manipal Hospitals will be utilised to finance the acquisition of 50.9 per cent stake in SRL (20 per cent from FHL and 30.9 per cent from other investors, for which discussions are currently underway).
In addition, the investment will support the proposed acquisition of hospital assets owned by RHT Health Trust (RHT) and the growth of the hospitals and the diagnostics businesses, the release added. The combination of Manipal Hospitals and Fortis Hospitals will result in the creation of the largest provider of healthcare services in India by revenue with 41 hospitals in India and four hospitals overseas and an installed bed capacity of over 11,000 (including teaching hospital beds of Manipal Hospitals), the official release said.
Ranjan Pai will become the largest investor in the group with a share of 37.9 per cent, while TPG will have a 20 per cent stake. The share of FIIs and FPIs will be around 15 per cent, while YES Bank will hold 5 per cent of the shares.