IHH to review Fortis funding requirements, says CEO Tan See Leng

New Delhi: IHH Healthcare Bhd, which has acquired controlling stake in Fortis Healthcare, plans to review the Indian hospital chain’s capital expenditure needs over the next few months, according to the Malaysian healthcare group’s chief executive officer.

“One of the key things we will be working with the current management is to review all of the projects,” IHH Healthcare CEO Tan See Leng said during a media briefing on Wednesday. “We will also review the cap-ex that will be required and study the overall funding that’s required,” he said, adding that this plan is in the early stages as IHH has just taken control of Fortis.

IHH also plans to fill top-management vacancies following the resignation of Fortis’ CFO Gagandeep Singh Bedi and CEO Bhavdeep Singh. The company is “close” to selecting the replacements, said Tan, who did not disclose the shortlisted candidates.

On Tuesday, IHH acquired 31.1% stake in Fortis, India’s second largest hospital chain, through an issue of fresh shares in an investment valued around Rs4,000 crore. Tan and three other officials nominated by the IHH group were subsequently appointed to the Fortis board.

“This has allowed us to secure Fortis’ operations and lay the ground for longer term sustainable growth. We will now stabilise, we will now restore Fortis further…and allow it to create sustainable value for our stakeholders even as we launch our open offer once we get Sebi’s approval in the coming weeks,” he said.

IHH is likely to initiate its open offer for 26% stake in Fortis by December 15 after clearance from the Securities and Exchange Board of India, according to Tan.

The group may also consider changing the name of the hospital chain at a later stage, as the ‘Fortis’ brand is subject to certain contractual obligations that require the company to pay erstwhile promoters Malvinder and Shivinder Singh royalty each year, he said.

“Within the IHH umbrella itself, we do have multiple brands that we can use (like Parkway, Mount Elizabeth and Gleneagles). We are not completely closed off to the usage of the different brands; it makes economic sense,” said Tan, adding that the decision on this front has not been made yet.

The amount invested by IHH into Fortis so far is expected to be utilised towards buying back hospitals that were earlier sold to Singapore-based Religare Health Trust. The Malaysian healthcare group’s CEO said that Japanese drug maker Daiichi Sankyo’s ongoing case to enforce a Rs3,500-crore arbitration award against the Singhs is not expected to impact this buyback.

“We were advised by our lawyers and our financial advisors. The risk of us taking the hospitals back into the Fortis umbrella using our preferential allotment seems to be fairly well mitigated,” said Tan, adding that this was due to the removal of the Singhs from Fortis’ promoter category.

Even while Fortis is currently a party to Daiichi’s ongoing lawsuit, the Indian hospital group has “severed” all links with the Singhs and is also seeking to recover over Rs 450 crore loaned to entities linked to the brothers through inter-corporate deposits, said Fortis chairman Ravi Rajagopal. “We are on the same side as Daiichi,” he said.

Following a recent order by Sebi directing the Singhs and companies controlled by them to return the money to Fortis, the company is taking all necessary steps to recover the amount, added Tan.