Fortis Healthcare

Oct 15, 2013 No Comments by

 

 

Fortis Healthcare

Name – Fortis Healthcare

Sector – Healthcare

Market Cap – Rs 3300 Cr

Sales Turnover in June 2013 – Rs 1500 Cr

Loss in June 2013 – Rs 219 Cr

Profile

Fortis Healthcare is one of the biggest healthcare firms in India. It is a global company with its presence in about 11 countries. It has a total of 76 hospitals all over the world with about 12,000 beds. In India it has about 3,800 operational beds. It has 62 healthcare facilities in India which are spread over 35 cities. Apart from this it’s diagnostic business is spread in 450 cities.

The promoters of the company are the Singh brothers – Malvinder Mohan Singh and Shivinder Mohan Singh. These two brothers collectively own 81.5% of the company. They were the promoters of Ranbaxy. In 2008 they sold of their stake, 33.5%, in Ranbaxy to a Japanese firm in about $2 billion. They are also the promoter of Religare Enterprise Ltd. Malvinder Singh is also a member of the Board of Trade, Ministry of Commerce and Industry. He also advices the Indian Government on foreign trade policy. So, the promoters are credible and experienced people.

Challenges

The profits have been very less in the past quarters, in the range of only Rs 3 Cr to Rs 10 Cr. The primary reason for this is the huge debt of the company. Fortis, as mentioned in the balance sheet of 2012, had a total debt of Rs 6500 Cr. The interest payments each quarter was about Rs 30 Cr. This has majorly impacted the profitability of the company. Due to the huge debt 63.55% of the shares are pledged at present.

Positives

Fortis’ Singapore subsidiary had acquired Dental Corporation, Australia a few years back. It had sold this business to Bupa Australia Health in Rs 1,452 Cr. This money will be used to repay the debts. Also, in October 2012 Religare Business Trust was listed on Singapore Stock Exchange. This helped the company in raising about Rs 2,260 Cr. These two capital inflows will reduce the total debt of the company by about Rs 4,000 Cr in future.

Recently, Fortis fixed the Rs 92 as the price for Institutional players for investing in the company. The bids will be open in a month and the resulting cash flow will further reduce the debt. Fortis is also planning to raise Rs 540 Cr from International Financial Corporation, the private sector arm of World Bank. The good thing about this is that IFC is a long term investor. So, it will give ample time to Fortis to expand in a planned manner.

Fortis is planning to expand extensively in India, majorly in Tier II and Tier III cities as the healthcare facilities in such cities are not good.  In next one year it is expected to add 850 beds – 450 in it’s flagship hospital in Gurgaon, 200 each in new hospitals which are going to be set up in Ludhiana and Chennai.

The present lifestyle of Indians is very stress prone. The medical spending of Indians is growing year on year. Everyone is ready to compromise on other luxuries in life but they don’t want to compromise on healthcare facility. When it comes to medical facility they want the best. Fortis provides one of the best healthcare facilities in India.

Looking at the chart, we can clearly see that Fortis is trading near its 52 week low. It is in expansion mode. Once the debt is repaid off, the profits will surge up. The stock has recovered from 90 levels currently trading around 107-108. At sub 100 levels it can be accumulated. So, according to our analysis we recommend this stock with a time frame of 12 months to 15 months.

 

Entry – Rs 90 – Rs 95

Exit – Rs 150

Time frame – 12months to 15 months

Equity

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