Fortis Healthcare gets nod for Rs 1,000 cr rights issue

NEW DELHI: Hospital chain Fortis Healthcare has sought the government���s approval to go ahead with its Rs 1,000 crore rights issue which would allow its existing foreign investors to subscribe to new shares and warrants.

In December 2008, the company���s board had decided to come up with a rights issue of equity shares with warrants. There has been speculations that Fortis is in talks to acquire rival firm Wockhardt Hospital and the funds raised through the rights issue may be used to fund the acquisition. But, Fortis Healthcare management has repeatedly denied any talks with Wockhardt and has said that the funds would be used for organic growth plans and restructuring its balance sheet.

A person negotiating on behalf of Fortis Healthcare told ET, "It is not clear whether the current Indian laws of Foreign Exchange Management Act (FEMA) makes it mandatory for an Indian company to get a prior approval or can directly issue warrants to a foreign investor, which are exchangeable with equity shares."

In the past, Foreign Investment Promotion Board (FIPB) ��� the nodal government body that approves foreign investment into the country ��� has cleared certain proposals involving issue of warrants to foreign investors but has been silent on whether it indeed requires a prior approval. Due to lack of clarity companies often seek FIPB nod while issuing warrants to foreign investors.

At the end of the quarter ended December 31, 2008, two UK-based investors Trinity Capital and Axa World Funds held 3.53% and 1.31% stake respectively in Fortis Healthcare. The company is expected to finalise the price and other details of the issue after getting the regulatory nod.