Wockhardt sells 10 hospitals to Fortis | business | Hindustan Times
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Wockhardt sells 10 hospitals to Fortis

business Updated: Aug 24, 2009 21:28 IST
HT Correspondent

In the biggest deal in the healthcare sector, Fortis Healthcare Ltd has moved to acquire 10 hospitals, including two still being built, for Rs 909 crore from Wockhardt Hospitals, a subsidiary of pharmaceuticals group Wockhardt, which has been going through a financial upheaval.

Wockhardt will retain seven hospitals in the deal to be completed by December.

Fortis, with the same parentage as Ranbaxy, which has now been sold to Japan’s Daiichi group, plans to fund the acquisition partly through a rights issue and the rest through internal accruals and debt. About Rs 190 crore will go towards the under-construction hospitals.

Malvinder Mohan Singh, Group Chairman for Fortis, said the acquisition was in sync with the leadership position they want to have in the country’s healthcare sector. “Our vision is to have 40 hospitals and 6,000 bed capacity by 2012, and have earmarked capital expenditure of around Rs 1,600 crore for it,” he said.

Wockhardt Hospitals, which withdrew an initial public offer (IPO) early last year on account of the financial meltdown hitting the markets, was struggling to clear Rs 500 crore in debt.

“We would be using the amount to pay the debt and fund our expansion programmes. We are planning to add five more hospitals,” said Habil Khorakiwala, chairman, Wockhardt.

The acquisition would enhance Fortis' footprint in Southern, Western and Eastern India. “The partnership would enable vast pool of medical talent and quality healthcare infrastructure under the Fortis network to deliver a superior value proposition,” Singh said.

With the acquisition, Fortis group would now have 37 hospitals under its brand name and an additional 1,902 bed capacity, taking its talley to 5,180.

In its 2008 annual report, Wockhardt had said “the liabilities due for repayment in 2009 amounts to approximately Rs 14,414 million, which is greater than the currently expected cash flows from business and any committed or contracted sources of funds of the company.” During the quarter ended June 30, 2009, Wockhardt sold some of its non-core businesses, Esparma, Animal Healthcare and the Nutritional business, raising about Rs 800 crore to bring down its overall debt.

On the hedging front, banks had at the end of 2008 unilaterally cancelled the derivative/hedging contracts on non-payment of margin money. The banks had demand that Wockhardt pay Rs 489.52 crore, which the company has treated as a contingent liability and has not acknowledged it as debt. Further, the company during the second quarter of 2009 recorded MTM losses on hedging of Rs 255cr even though the rupee appreciated by 5.6 per cent.