Fortis Healthcare shares jump on Fortis Malar Hospital divestment

Fortis Healthcare share price gained nearly a percent in early trade on November 28 as the company announced the divestment of Fortis Malar Hospital, Chennai to MGM Healthcare Private Limited.

At 09:25am, Fortis Healthcare was quoting at Rs 366.20, down Rs 0.10, or 0.03 percent and Fortis Malar Hospitals was quoting at Rs 72.64, up Rs 3.45, or 4.99 percent on the BSE.

“…. on November 24 announced signing of definitive agreements by its certain subsidiaries for sale of the business operations along with the land and building assets pertaining to Fortis Malar Hospital situated at Gandhi Nagar, Adyar Chennai to MGM Healthcare Private Limited,” the company said in its press release.

The consideration for the sale is approximately Rs 128 crore, which will be an all-cash deal and is estimated to be consummated by the end of January 2024; subject to certain conditions precedent and closing conditions as stipulated in the definitive agreements including the approvals from shareholders of both Fortis Healthcare and Fortis Malar Hospitals Limited respectively.

The transaction comprises the divestment of: (1) the business operations pertaining to Fortis Malar Hospital, in which Fortis Healthcare owns a 62.7% equity stake; (2) The OPD and radiology business operations related to the Fortis Malar Hospital (including the land and building on which Fortis Malar Hospital is situated) and the land parcel adjacent thereto, all of which are residing in Fortis Health Management Limited; and (3) an adjacent land parcel currently used as a parking premise, residing in Hospitalia Eastern Private Limited (HEPL).

“The proposed divestment of the Fortis Malar facility underpins our focus on optimizing the current portfolio of our hospital assets with a view to prioritize our growth and expansion in other key markets and re-allocate capital judiciously. This is our second under performing asset divestment in the last 2 quarters and emphasizes our resolve to improve our overall profitability and margins in the hospital segment,” said Ashutosh Raghuvanshi, Managing Director & CEO, Fortis Healthcare.

Foreign research house Goldman Sachs has maintained a buy rating on the stock with a target of Rs 400 per share.

The company announced the divestment of Malar Hospital for Rs 128 crore, marking its exit from the Chennai market.

The divestment is a significant step in the company’s ongoing portfolio rationalisation strategy.l Meanwhile, it still has 4-5 facilities operating inefficiently, which could potentially divest some.

Fortis is planning to add 1,400 beds (ex-acquisitions like Manesar) over the next 3-4 years, largely in Delhi NCR & Punjab regions.

Fortis Healthcare had reported a 15.7 percent year-on-year (YoY) fall in net profit at Rs 183.9 crore for the July-September quarter.

Fortis Healthcare Limited is a leading integrated healthcare delivery service provider in India. The healthcare verticals of the company primarily comprise hospitals, diagnostics, and daycare specialty facilities. Currently, the company operates 27 healthcare facilities (including O&M facilities). Moneycontrol