New Delhi: India’s anti-trust regulator Competition Commission of India (CCI) is likely to give its approval to the Fortis-IHH deal by the end of October, bringing the curtains down on the bidding war for Fortis that started in February this year after founders Malvinder and Shivinder Singh lost shareholding because of debt.
The Fortis Healthcare board had in July unanimously accepted the binding offer from IHH Healthcare Berhad to invest ₹ 4,000 crore in the cash-strapped hospital chain, outbidding a consortium of Manipal Health Enterprises and TPG Capital , and ending the search for an investor.
Law firm Khaitan and Co., which is a legal advisor to Malaysia’s IHH Bhd, has been following up with CCI and IHH is likely to get an approval by October, according to two people aware of the matter.
Following the CCI approval, IHH could pick up a controlling stake in India’s second-largest hospital chain by infusing around ₹ 4,000 crore for equity shares at ₹ 170 apiece and subsequently initiate an open offer for additional stake.
The approval from CCI is critical at this point to ensure that there is no impairment of assets in the ecosystem in terms of making payments to vendors on time, dispersing salaries to doctors and maintenance of equipment .
The company is also facing investigations over alleged diversion of funds by the Singh brothers, a charge that the two, who have since left the company, deny.
However, even as Fortis wrestles with investigations before IHH takes over, it is managing the cash flow efficiently.
“The stresses faced in the past year are being dealt with now especially with the imminent restoration of crucial bank credit lines which will help restore vendor faith in Fortis….Like any other organization, we continue to build efficiency in process and we continue to examine our internal processes to get best outcomes within the investments made in the most efficient manner,"said Ravi Rajagopal, who was appointed chairman of Fortis Healthcare in June this year.
Rajagopal, along with other members of the newly constituted board, was mandated to evaluate offers for cash-strapped Fortis and is working with the management to bring it back on a growth trajectory. “The new board was reconstituted at a critical juncture when the company was faced with a number of situations. The shareholders had not expressly given any mandate. But they had voiced concerns around certain governance issues and had also urged that the bidding process to invite a strategic partner be as transparent as possible with the criteria for selection being fair and open. In addition, the board is working with the management team to bring stability to the organization and get it back on a growth trajectory," Rajagopal added.
However, the hospital has so far not resorted to cost cutting to beat any cash flow crunch, Rajagopal further said. “We will have to make sure our organization model is aligned to Fortis’ potential for growth and maintaining its strong competitive position. This will be a continuous exercise. We do not pursue cost cutting as an end in itself," he said.
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Fortis says that its attrition rates have been below expectations, given the challenges.
“In the past year, people have remained committed to what Fortis is reputed for, namely excellent patient care and delivery and continued investment in medical technology. While the company has been through some turbulence in the last one year, all 17,000 plus Fortisians stood together. Fortis managed to retain so many of its doctors through this difficult period. Our clinicians, nurses, paramedics, technicians and all others at Fortis stood by us and continued to deliver in spite of all odds. We are confident that there is a renewed, bright future for the company," he said.