No plans to list diagnostic arm Agilus Diagnostics: IHH Healthcare

Engaging with regulator on open offer for 26.1% stake in Fortis

Malaysia’s IHH Healthcare, which operates hospital networks under Fortis and Gleneagles brands, has no plans to list its diagnostics arm Agilus Diagnostics, a Fortis subsidiary, senior company officials said.

The company believes that diagnostics services (or laboratory business), which currently contributes around 7 to 10 per cent of IHH’s global turnover, is ‘integral’ to its operations in any country.

“We have got the top lab in the country in three countries – Singapore, Malaysia and Turkey – to support our operations. We feel in India we need a reliable laboratory to support Fortis and Gleneagles growth,” said Prem Kumar Nair, Group CEO, IHH healthcare.

“We are not thinking of an IPO or anything at the moment,” he added.

Recently, Fortis Healthcare acquired a 31 per cent stake held by private equity players in Agilus Diagnostics for Rs 1780 crore, a deal that valued Agilus at Rs 5,700 crore.

Agilus is planning to expand its footprint (currently 400 labs and 4,000-odd collection touch points), and is open to inorganic expansion as well in India.

Ashok Pandit, group chief corporate officer, IHH healthcare, said it has enough cash on its books, and is well capitalised. As of August 31, it has Rs 270 crore cash in its books.

IHH plans to grow its laboratory business vertical (IHH Laboratories) globally. It intends to focus more on higher end tests like oncology work, genomics tests, molecular genetics, and precision medicines.

The Malaysian major is planning to double its bed capacity in India to 10,000 in the next few years, Nair said, adding that of this around 2,000 beds would come through brownfield expansion in the next 4-5 years.

At present, IHH operates over 5,000 beds in India under Fortis and Gleneagles.

Fortis plans to add close to 2,000 beds and Gleneagles another 600 beds. Globally, IHH has announced plans to add 4,000 beds organically over the next few years, of which more than 50 per cent is likely to take place in India.

Another 3,000-odd beds would eventually come through possible acquisitions, where the company is looking at assets which are in its core markets.

This is strategically aligned with its current operations; and from a returns perspective is EPS positive in two to three years.

Nair clarified that Fortis can fund its growth plans from internal accruals.

India is among the top markets globally for IHH, and according to its second quarter results presentation, it contributes 17 per cent to its global revenues and 13.7 percent to Ebitda as of H12024 calendar.

IHH bought a 31.7 per cent stake in then struggling Fortis Healthcare in 2018 and had plans to make an open offer at Rs 170 per share to acquire another 26.1 per cent.

This, however, has been delayed due to litigation. Shares of Fortis Healthcare have more than tripled in the last six years, currently trading at levels above Rs 600.

Pandit said: “Let's wait and see where we end up. But we are very happy with where the Fortis stock price is.”

He added that they are engaging with the regulator on the open offer.

Recently, it has acquired full ownership of Global Hospitals’ remaining stake held by Ravindranath GE Medical Associates for around Rs 740 crore.

It acquired a 73.4 per cent stake in Global Hospital for Rs 1,284 crore in 2015.

For now, IHH would continue with a dual-brand strategy in India.