Fortis Healthcare Sells Fortis Malar Hospital in Chennai for Over Rs 128 Crore

New Delhi: Fortis Healthcare Ltd announced on Friday that it would sell Fortis Malar Hospital in Chennai, along with land and building assets, to MGM Healthcare Pvt Ltd for over Rs 128 crore. In a regulatory filing, Fortis Healthcare stated that its certain subsidiaries have signed definitive agreements for the sale of business operations, along with land and building assets, pertaining to Fortis Malar Hospital situated at Gandhi Nagar, Adyar Chennai, to MGM Healthcare MGM, a prominent healthcare delivery service provider.

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Transaction Details

The total sale consideration is approximately Rs 128 crore. The transaction comprises the divestment of the business operations of Fortis Malar Hospital, residing in the listed arm Fortis Malar Hospitals Ltd in which Fortis Healthcare owns a 62.7 percent equity stake. Additionally, it includes the sale of OPD and radiology business operations related to the Fortis Malar Hospital, including the land and building on which Fortis Malar Hospital is situated and the land parcel adjacent, all of which are residing in Fortis Health Management Ltd FHML, a wholly-owned arm. Besides, the transaction also covers the sale of an adjacent land parcel currently used as a parking premise, residing in Hospitalia Eastern Pvt Ltd HEPL, which is also a fully-owned arm, Fortis Healthcare said.

Earlier Sale

Earlier, Fortis Malar Hospitals Ltd said it signed a definitive agreement for the sale of its business operations pertaining to Fortis Malar Hospital at Gandhi Nagar, Adyar, Chennai, to MGM Healthcare MGM for about Rs 45.5 crore. The transaction will be an all-cash deal and is expected to be consummated by the end of January, subject to certain conditions, including approvals from shareholders of both Fortis Healthcare and Fortis Malar Hospitals, respectively.

Reason for Sale

The divestment is part of Fortis' ongoing portfolio rationalization strategy to focus on deepening its presence in select geographic clusters where it has a sizeable presence. It follows the divestment of Fortis Healthcares business operations in its Vadapalani facility in Chennai in July 2023. On the reasons for the sales of the Malar Hospital, which has around 140 beds, the company said it has been facing certain legacy issues. Over the past few years, with continuous efforts, a number of these issues have been resolved. However, some of the legacy aspects continue to persist, which have given rise to certain challenges for the company and constrained further investments into the facility, it said. The matter has accentuated the need for the company to divest its business as a viable and prudent option for its stakeholders, it added.

Quotes from Key Executives

Fortis Healthcare Managing Director & CEO Ashutosh Raghuvanshi said, "The proposed divestment of the Fortis Malar facility underpins our focus on optimizing the current portfolio of our hospital assets with a view to prioritize our growth and expansion in other key markets and re-allocate capital judiciously. This is our second underperforming asset divestment in the last two quarters and emphasizes our resolve to improve our overall profitability and margins in the hospital segment."

Fortis Malar Hospitals Non-Executive Chairman Daljit Singh said, "After a number of deliberations amongst the management and the board, the proposed divestment of business operations of the Malar Hospital seems to be a practical solution in the interest of all stakeholders."

MGM Healthcare Managing Director Prashanth Rajagopalan said, "As a part of our long-term growth and expansion plans, MGM Healthcare has been investing in both greenfield and existing facilities to enhance care and clinical offerings for a broader patient population. The acquisition is a crucial step in our planned capacity expansion nationwide, allowing us to extend our commitment to providing the best in quality, affordable, and personalized healthcare. With this acquisition, we would bring our total bed count in Chennai to approximately 800 beds."

The sale of Fortis Malar Hospital is part of Fortis Healthcare's ongoing strategy to rationalize its portfolio and focus on key markets. The transaction is expected to be completed by the end of January 2024, subject to regulatory approvals.