Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Money / Fortis: killing two birds with one stone
BackBack

Fortis: killing two birds with one stone

Fortis: killing two birds with one stone

Premium


Parkway Holdings itself had aggressive growth plans in international markets, especially in India, China and Malaysia. Singapore is its largest market, contributing 68% of revenue, but grew by 7% compared with the 20% growth in its international business. In India, it operates a hospital as a joint venture with the Apollo group, Apollo Gleneagles in Kolkata. Another joint venture is the proposed ParkwayHealth Khubchandani Hospital, a 1,000-bed facility in Mumbai. It is also partnering with the BK Modi group in its expansion of the Delhi-based GM Modi Hospital. Parkway had plans to set up several multi-speciality hospitals in India and in some years, it would have perhaps built a pan-India footprint competing with existing players. That could have become a threat for a firm such as Fortis, but not any more.

Though an important consideration,?this?alone?could not have been enough?of a reason for Fortis to spend nearly half its market capitalization to buy a relatively small stake. Parkway has been valued at approximately four times its 2009 (year ended December) sales of Singapore $979 million (around Rs3,190 crore). In 2009, its sales grew by 7% while its profit after tax (PAT) and minority interest grew by 29% to S$118 million. Its earnings before interest, tax, depreciation and amortization margin works out to 24% and its PAT margin (after minority interest) is 12%. That compares favourably with Fortis’ comparative figures of 18% and 7%, respectively, in the nine months ended December. But the full impact of the acquisition of Wockhardt’s hospitals is not reflected in its performance.

One outcome of this acquisition will be a sizeable increase in the equity and debt levels of Fortis. Once the precise funding mix is known, the impact on its capital structure can be determined. How Fortis consolidates this acquisition will determine the extent to which Parkway’s financials will reflect in its own books. But the most crucial aspect is the way forward. Fortis prides itself on its world class facilities and processes, including its healthcare capabilities. Scale in the healthcare business can bring about clear advantages in procurement—equipment and supplies—but the benefits in other areas are not as evident.

While the initial reaction has been positive, more clarity is needed to show that this acquisition?is?indeed transformational.

Write to us at marktomarket@livemint.com

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 14 Mar 2010, 09:32 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App