Wockhardt Hospitals Ltd, promoted by the founders of pharma major Wockhardt Ltd, on Friday sold ten of the 17 hospitals it owns to New Delhi-based Fortis Healthcare, India's biggest hospital chain by market value, for Rs 909 crore.
It plans to use Rs 500 crore of the money raised to repay debt, making Wockhardt Hospitals nearly debt-free, and the rest to set up, surprisingly, some more hospitals.
For Fortis, the acquisition will add hospitals in locations where it doesn't have much of a presence, said Himani Singh, an analyst at Mumbai-based Centrum Broking.
"Wockhardt Hospitals was profitable when they planned an IPO, so the transaction seems to be earnings per share accretive to Fortis," Singh told Bloomberg.
Sarabjit Kour Nangra, vice-president, research, at Angel Broking, said the deal will strongly benefit Fortis as it consolidates its position. At the estimated valuations of 8-9 times EBITA, the deal is attractively valued, Nangra said.
Wockhardt Hospitals will add 1,200 beds in the next three years from 700 now using the money, managing director Anil V Kamath told NW18.
Habil Khorakiwala, chairman, Wockhardt, said Wockhardt Hospitals has been in the hunt for funds after it was forced to cancel plans for a Rs 653 crore initial public offering (IPO) a year and half ago.
"We have planned hospitals in Bhopal, Jabalpur, Patna and Varanasi. We have one hospital coming up in Central Mumbai and another in Juhu-Versova area of Mumbai," Kamath said.
Fortis will fund the acquisition through a Rs 350 crore rights issue, debt and internal accruals.
The 10 hospitals that were sold to Fortis include five in Bangalore, three in Kolkata, and two in Mumbai.
Wockhardt won't be able to operate hospitals in the three cities for three years, according to the sale agreement.
Two Mumbai hospitals will be excluded from the no-competition agreement, Khorakiwala said.
The new hospitals would focus on therapeutic areas such as cardiology, critical care, neuro sciences, orthopaedics — which have been Wockhardt's focus — and would take the company's strength to 3,000 beds from 1,000 beds at present.
Shivinder Singh, managing director of Fortis Healthcare, said the transaction will be completed by December.
In the last financial year, Fortis had revenues of Rs 659 crore, while Wockhardt's were at Rs 313 crore.
"The combined strength of the two will result in addition of 1,902 beds, taking the aggregate bed capacity at Fortis to 5,180 beds, taking us closer towards of 6,000 beds by 2010,"said Singh.
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