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Fortis Healthcare scraps Fortis Malar Hospitals, SRL merger scheme

The Fortis Malar stock reacted positively to the decision and the scrip closed at Rs 51.85 a share

Sohini Das  |  Mumbai 

Fortis Healthcare

Ltd (FHL) withdrew the scheme of arrangement and amalgamation between its step-down subsidiary Hospitals, a listed entity and its diagnostics arm Ltd, citing delay in completion of the process and strong headwinds in the sector. Sources close to the development said the plan was called off primarily for technical reasons (delay in completion) and since is on the block, the management felt that it would be best for the new buyer to take a call on the structure of the businesses. The stock reacted positively to the decision and the scrip closed at Rs 51.85 a share, up 0.68 per cent. The plan was proposed in August 2016 and ideally should have taken six to eight months to complete. In a late night filing to the exchanges on Wednesday, said, “The entire process was expected to take six to eight months, however, due to reasons beyond the company’s control, the process took over 19 months and is still not complete.” The scheme is currently pending for approval with the National Company Law Tribunal (NCLT), Chandigarh bench, it said. According to the original plan, was to hive off its diagnostic arm to Hospitals. and Fortis Malar were to become one entity and be called SRL.

In turn, Fortis Malar was to sell its Chennai facility to FHL by way of a slump sale for Rs 430 million. ALSO READ: Fortis group gets CCI green light for internal reorganisation Fortis said during the past 19 months, the health care sector has witnessed strong headwinds and performance of the diagnostics business has not been ‘optimum’. “Given the challenges/headwinds in the sector and less than optimum performance of the diagnostics business during the period of delay, the demerger and a subsequent listing may result in value unlocking that may not be optimum for Fortis shareholders at this point of time,” it added. Promoter and promoter group hold 62.9 per cent in Fortis Malar. and entities related to him including Holding, Fortis Hospitals Ltd, Malav Holdings, RHC Holdings are among the promoter group entities. ALSO READ: approves demerger of diagnostics business According to market sources, one of the rationales behind the decision to scrap the amalgamation might have been to keep the Singh brothers away from SRL. Fortis Malar has a market capitalisation of Rs968 million. SRL, a wholly-owned subsidiary of FHL, is valued at Rs50 billion. “The valuation of Fortis Malar is quite low. Given the high valuation of SRL, the promoters of Fortis Malar would have not got more than 2 or 3 per cent stake in SRL,” said someone who is in race to buy Fortis Healthcare.

Story so far
  • In August 2016, Fortis Healthcare decided to demerge its diagnostics biz into Fortis Malar Hospitals
  • SRL and Fortis Malar were to become one entity and be called SRL
  • Fortis Malar is a step-down subsidiary of Fortis Healthcare
  • Fortis Malar was to sell its Chennai hospital to Fortis Healthcare for Rs 430 mn
  • Scheme for demerger and amalgamation was to take 6-8 months to complete
  • Process was not completed even after 19 months
  • Fortis Healthcare decided to scrap the scheme citing delay in completion of the process
  • Fortis Malar has posted a profit after tax of Rs 31 mn on a revenue of Rs 1,491 mn for 2017-18

First Published: Thu, June 14 2018. 21:20 IST