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Fortis will benefit from IHH's global experience, says chairman Ravi Rajagopal

Fortis will benefit from IHH's global experience, says chairman Ravi Rajagopal

Fortis will benefit from IHH's global experience, says chairman Ravi Rajagopal
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By CNBC-TV18 Jul 19, 2018 6:42 PM IST (Updated)

Malaysia-based IHH Healthcare is a major global player and Fortis will benefit from their international best practices in terms of patient care and clinical practices, said Ravi Rajagopal, chairman, Fortis Healthcare.

Malaysia-based IHH Healthcare is a major global player and Fortis will benefit from their international best practices in terms of patient care and clinical practices, said Ravi Rajagopal, chairman, Fortis Healthcare.

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After a lot of uncertainty and speculations, the board of the cash-strapped firm accepted Rs 4,000 crore bid from IHH which outbid rival bidder TPG-Manipal in the race.
The world’s second largest healthcare group by market capitalisation, will acquire a stake of between 31.1% to 57.1% of Fortis, through a preferential allotment of shares (31.1% stake), and a mandatory open offer (up to another 26% stake), it said in a statement on Friday.
In an exclusive interview with CNBC-TV18,  Fortis chairman Ravi Rajgopal said that both IHH and Manipal could have been attractive partners to Fortis, however, he added that the company looked at the financial attractiveness and simplicity while evaluating the offers and selected the former as it looked more compelling than others. “Strategically IHH looks better placed than other bidders,” he said.
Edited excerpts
This is very promising and a huge deal, what made the IHH offer so compelling?
Both IHH and Manipal would have been very attractive suitors and partners to Fortis. So in a way, I feel sorry for Manipal that they were sort of pipped at the post.
Having said that, both bidders are credible, reputed and large healthcare players. To that extent, I would say both would have been very compelling propositions.
The thing that won the bid for IHH was simply that in our bid document, we had said that we will evaluate the bid on the basis of financial attractiveness in terms of quantum, in terms of certainty, in terms of simplicity of structure. Going by these three counts, it was evident that IHH was a little more compelling than Manipal.
Q: IHH is a major global player, it has hospitals all over the place, what does it bring to the table?
Simply that what you have just said. It is a major global player and therefore we would have the benefit of their international best practices in terms of patient care and clinical practices.
You also have to remember that IHH is already present in India, they run a few hospitals and they know the market well.
Looking from their point of view, they have a very large footprint across Asia going all the way up to Turkey. Unsurprisingly, India has been the sort of missing link in their geographic spread.
I think they will bring a huge amount of their experience apart from their balance sheet strength. Their willingness to look at the long-term strategy as well as the ability to commit investments for growth is very important.
Q: Are shareholders happy with the deal?
That is a little premature, I  hope they will and what gives me confidence is the fact that since we came in as a new board about two months ago, we have tried to be as open as we could.
The way we have gone about things whether it is in terms of the disclosure of the investigation report or the audit processes we had to go through. The board took the decision to publish the unaudited results and that was a very deliberate choice.
And then the bid itself, we put out a bid document, which we got feedback from the shareholder saying it was very clear, comprehensive and transparent. So the outcome should be no surprise to anyone.
Q: Is the management likely to continue or there will be any significant changes?
I don’t think there is any significant change in the cards. Bhavdeep Singh, the CEO, is doing a tremendous job. In fact, he has held the company together as it has been going through very tough times in the last six to ten months.
I don’t think there are any significant changes being planned but having said that, once the IHH comes in as a majority shareholder, I am sure they will have their views on talent rotation and bench strengths.
Q: The board structure, any overhauling there?
Eventually, IHH will have a majority representation on the board and that is only natural.
Q: Do you see any possibility of any change in the open price offer for Fortis?
I wouldn’t think so. Keep in mind the price being offered today is at a 30 percent premium to the unaffected price, which was before July 3. Even to the current market price, it is at a premium of 20 percent.
It is a fact that operational headwinds have affected Fortis. In better times, their performance would have been more resilient but we are where we are and we have to recognise that operations has taken a battering because of all the external issues and cash has become a serious issue.
So we are talking of a company that needs to be pulled back from the brink and brought back in the good health. In a situation like that, you have to do the best that you can and I think the price that IHH has offered is indeed very fair and very generous.
Q: There have been some investigations into funds at Fortis, has that been factored in?
Of course. I think all that came out of the Luthra investigation report have been fully factored in. We, as a new board, took a decision that we will be abundantly cautious in more than adequately provisioning.
Time will tell us how much of that has been somewhat slightly on the cautionary side against just about adequate. My sense is that we have amply covered it, we don’t expect any new issues to come out. There are some government investigations, we hope their findings will concur with what Luthra has come out with.
Q: Do you see any other challenges in the consummation of this transaction?
I hope not. For the reasons that I said since we have been very transparent. There is nothing that we have held back from anyone. So we hope that effort at being very plain, open, transparent will have its own reward.
Q: India certainly seems to need quality healthcare that is also affordable. Will this togetherness now take the country and patients a step towards that aim?
I think given IHH’s commitment to look at the long-term, given that there are big needs on the healthcare side in India, there are issues of affordability on the one hand, equally there are pressing needs for quality healthcare for people who can afford, especially the speciality care, and I am hoping that in course of time, we would be able to address these different segments and try and strike a balance.
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