Selling in tango

Fortis Healthcare promoters are unlocking some value on their own

India’s leading healthcare provider, Fortis Healthcare, has witnessed a significant drop in promoter holding. The selling between June 2 and June 12 by promoter entity Fortis Healthcare Holdings has brought down the stake of Malvinder and Shivinder Singh to 46.4%. Overall, between March 2016 and March 2017, there has been a sizeable reduction in the stake of the promoter group, from 71.28% to 52.3%.

In stark contrast, both domestic and foreign portfolio investors have increased their stake in the firm during the same period. While the exposure of domestic mutual funds has increased marginally to 0.06%, from 0.01%, FIIs have nearly tripled their stake, from 12.82% to 35.4%. Notably, Standard Chartered Private Equity holds 3.05% and IFC 6.76% as of March 2017. The other investors who have a sizeable presence are Amansa Holdings (3.63%) and Morgan Stanley (3.42%). StanChart PE reportedly has offloaded about 1.4% in April and that will reflect when the June quarter shareholding is disclosed.

The financial performance of the company is not much to write about but in the past one year, the stock is up 20%. It has been incurring a loss and debt has doubled from Rs.961 crore in FY16 to Rs.2,220 crore in FY17. Since cardiology forms a major part of revenue, stent price control introduced by the government has considerably impacted it. Demonetisation also affected the FY17 margins.

FIIs might be betting not only on the growth story in healthcare but also for a pop in the stock price on a possible sale. News reports seem to indicate that the promoters are in talks with IHH Healthcare for selling a controlling stake. IHH is controlled by Malaysia’s sovereign fund Khazanah and is an aggressive healthcare player in Asia.

Any planned stake sale by the promoters will not be smooth as Daiichi, who bought Ranbaxy from them, has filed a plea in the Delhi High Court against the Singh brothers from disposing their holding in Fortis. For Daiichi, the holding is collateral that could fund the Rs.2,562 crore awarded by a Singapore Tribunal for holding back vital information during the Ranbaxy sale. Though the order is being contested, the promoters seem to be hedging their bets by offloading a part of their holding after the stock’s recent run.