Fortis to buy realty assets back from RHT for Rs 4,650 crore

NEW DELHI: Fortis Healthcare will buy back the real estate assets that house its 14 existing hospitals and four upcoming projects from Religare Healthcare Trust (RHT) for Rs 4,650 crore, including Rs 1,152 crore of debt.

The transaction also involves Fortis Healthcare acquiring the 49% stake it currently doesn’t own in Fortis Hospotel from the Singapore Exchange-listed business trust. Fortis Hospotel runs two hospitals: Fortis Hospital Shalimar Bagh, New Delhi and Fortis Memorial Research Institute, Gurgaon. In February 2016, Fortis Healthcare acquired 51% of Fortis Hospotel for Rs 970 crore.

Fortis Healthcare, the hospital chain owned by Malvinder Mohan Singh and Shivinder Mohan Singh, sold these assets for about Rs 2,300 crore to the trust in October 2012 to de-leverage its balance sheet. Under an asset-light model, it then leased back the hospitals. Fortis has now decided to return to the conventional model under which it will own the assets to have better valuation as suggested by some of the potential suitors of the hospital chain.


“Fortis and the trustee-manager of RHT signed a term sheet and entered into an exclusivity arrangement proposing the acquisition of all the securities of RHT’s entities in India holding (directly or indirectly), clinical establishments and businesses via a purchase of securities for an enterprise value of approximately Rs 4,650 crore,” the company said in a statement.

The value includes Rs 1,152 crore of RHT debt that will be repaid, it added. The trust will distribute the proceeds from the sale among its unit holders as dividend. RHT is a registered business trust listed on the main board of the Singapore Exchange Securities Trading.

Currently, it has 807.8 million units outstanding. Fortis is a controlling unit holder of the trust with an indirect interest of 29.76%. “This restructuring is a significant initiative and will integrate RHT’s entire India-based asset portfolio into Fortis while also improving the overall financial health of the business,” said Bhavdeep Singh, CEO of Fortis Healthcare.

Fortis Healthcare has also entered into hospital and medical services agreements with entities held by the trust under which Fortis will pay service fees. The equity value of the deal is about Rs 3,500 crore.

Since Fortis Healthcare owns 29.76% of the trust, the net outgo for the company would be less than Rs 2,500 crore. Fortis Healthcare will fund the transaction through a combination of debt and equity.

“Due to legal course in Singapore, it will take 8-9 month to complete the transaction. As a result, Fortis Healthcare has sufficient time to raise the fund,” said a person familiar with the transaction. It is expected to pay about Rs 270 crore in the current fiscal year to RHT as service fee. Completion of the transaction will eliminate the service fee, improving its profitability.

“The proposed transaction will potentially enhance value for all its stakeholders. With the unwinding of the current structure, it would also make it easier for investors and other stakeholders to better understand the company’s business and financial performance,” the company said.