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Business News/ Companies / News/  TPG bids Rs3,000 crore for Fortis Healthcare stake
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TPG bids Rs3,000 crore for Fortis Healthcare stake

TPG Capital has also offered Rs1,500 crore for a stake in the merged entity of SRL Diagnostics and Fortis Malar Hospitals

TPG has proposed the current promoters, Malvinder and Shivinder Mohan Singh, who now own 67.5% stake in Fortis Healthcare, cede management control to the Fund. Photo: Ramesh Pathania/MintPremium
TPG has proposed the current promoters, Malvinder and Shivinder Mohan Singh, who now own 67.5% stake in Fortis Healthcare, cede management control to the Fund. Photo: Ramesh Pathania/Mint

Private equity (PE) fund TPG Capital has submitted a non-binding bid for a controlling stake in Fortis Healthcare Ltd and in the merged entity of SRL Diagnostics and Fortis Malar Hospitals, two people aware of the development said.

“TPG has offered to pay close to Rs3,000 crore for a 26% primary stake in Fortis Healthcare which will be followed by an open offer," said one of the two people cited above, requesting anonymity. “TPG has also offered to pay around Rs1,500 crore for a stake in SRL Diagnostics and Fortis Malar through a secondary sale (in which promoters will sell a large part of their holdings)."

In August, the board of Fortis Healthcare had approved the demerger of the diagnostics business—which consists of both its own centres and the 56.4% stake in SRL, which has diagnostics centres across India—and proposed to list it separately through a reverse merger with Fortis Malar Hospitals Ltd, a listed unit of Fortis Healthcare. The company currently owns 62.9% in Fortis Malar, which runs a large hospital in Chennai with an associated diagnostics business.

TPG has proposed that the current promoters, Malvinder and Shivinder Mohan Singh who currently own 67.5% stake in Fortis Healthcare cede management control to the PE Fund, said the second person, also requesting anonymity.

“The Singh brothers are likely to remain the single largest shareholder in Fortis Healthcare even after the open offer by TPG if the deal goes ahead," the second person said. “The modalities of how TPG will take control is being discussed and it may involve TPG getting special voting rights while Singh brothers continue only as financial investors.

While a spokesperson for TPG India refused to confirm or deny, an email sent to Fortis Healthcare and RHC Holding Pvt. Ltd (RHPL), the holding firm for the Religare and Fortis brands, was not answered till the time of going to press. A senior RHPL official who did not wish to be named, confirmed receiving a bid from TPG but maintained that discussions with TPG and a few other prospective buyers are currently underway and no final decision has been made.

Mint had on 10 January reported that four bulge bracket PE Funds which include TPG, KKR, Bain and a fourth unknown contender were in the fray to acquire a significant stake in Fortis Healthcare. Mint had further reported that the Singh brothers plan to transfer the ownership of Fortis Hospitals from Singapore-exchange listed Religare Health Trust to the balance sheet of Fortis Healthcare Holdings Pvt. Ltd (FHHPL), the holding company of Fortis Healthcare with an objective of improving the valuation of FHHPL.

Meanwhile, the Singh brothers who have also been in talks to refinance a large part of promoter debt with various lenders may not do so if the deal with TPG fructifies.

“If the Singh brothers are able to sell their stake in SRL for Rs1,500 crore, it will bring their debt to serviceable levels, assuming they will use the proceeds to repay a part of their debt," said a third person, a senior banker who did not wish to be named.

As of 31 March, RHPL had a net worth of around Rs6,900 crore and a debt of Rs4,064 crore. The firm’s key source of funds is treasury income, earned from investments and trading in mutual funds and from inter-corporate loans provided to group companies. For 2015-16, RHPL reported a net profit of Rs73.6 crore, as against Rs91.08 crore in 2014-15. TPG is an active investor in the Indian healthcare industry. In 2016, TPG Growth, the $7 billion growth equity investment platform of TPG Capital, made two acquisitions of hospital chains in south India.

TPG Growth acquired Rhea Healthcare Pvt. Ltd, a company promoted by family members of actor Mammootty for $33 million in July last year. The Bengaluru-based Rhea Healthcare operates a network of mother and child care centres in India under the “Motherhood" brand.

In April, TPG Growth acquired a majority stake in Cancer Treatment Services International (CTSI), a Hyderabad-based chain focusing on cancer treatment. The deal size was not disclosed. In February 2015, TPG Capital purchased a significant minority stake in Manipal Health Enterprises Pvt. Ltd for Rs900 crore.

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Published: 15 Jan 2017, 11:59 PM IST
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