Fortis Healthcare to Acquire 100% Stake in Artistery Properties for ₹ 32 Crore

Fortis Healthcare share price trading high in morning on September 26th as the company's board of directors approved a significant proposal. The proposal entails the acquisition of Kolkata-based Artistery Properties at an enterprise value of ₹32 crores. This strategic move will involve a 99.9% stake purchase in Artistery Properties through a share purchase agreement. At 10.35 am on the same day, Fortis Healthcare shares were trading at ₹335 on the National Stock Exchange (NSE), representing a 1.10% increase from the previous closing price.

The Acquisition Details

Through this acquisition, Fortis Healthcare will also gain ownership of a strategically located building adjacent to Fortis Hospital at Anandpur in Kolkata. This building is fully constructed with all necessary statutory compliances in place. With minimal customization and re-layout, it can be effectively utilized for accommodating outpatient departments (OPD), diagnostics, and daycare services. These facilities can be relocated from the main building of Fortis Anandpur Hospital.

Background and Approval

The decision to acquire a 99.9% stake in Artistery Properties Private Ltd (Artistery) for ₹32 crore was made during a board meeting on September 25, 2023. The acquisition of Artistery is based on the authorization given by Fortis Healthcare's shareholders through a Postal Ballot on August 5, 2022. The mandate originally authorized a subsidiary of Fortis Healthcare, International Hospital Ltd (IHL), to acquire land and a building from Artistery Properties Private, subject to prior approval from the Kolkata Metropolitan Development Authority (KMDA). The terms and conditions of this acquisition were mutually agreed upon by the involved parties. However, Fortis Healthcare has decided to modify the deal structure by directly acquiring Artistery Properties Private itself, bypassing the earlier-approved modality of land and building acquisition by IHL via a license transfer.

Timeline and Strategic Importance

The expected timeline for finalizing this acquisition is within 60 days after executing definitive documents, contingent upon meeting the conditions precedent outlined in the agreement. Artistery Properties Private possesses a license from KMDA, dated March 9, 2007, granting land use and occupancy rights for a 99-year period. This land's strategic location, adjacent to Fortis Hospital in Anandpur, Kolkata, positions it as a valuable asset in Fortis Healthcare's expansion strategy. The building on this property can be efficiently modified and reconfigured to accommodate a range of healthcare services, including outpatient departments, diagnostics, and daycare facilities. This expansion will complement the existing services offered by Fortis Hospital in the region.

Q1 Performance

Fortis Healthcare Ltd reported a 7.7% year-on-year (YoY) decrease in net profit to ₹124 crore for the first quarter ending June 30, 2023. This marks a decline from the net profit of ₹134.3 crore posted in the corresponding quarter of the previous year, as stated in a regulatory filing.

The total revenue amounted to ₹1,657.4 crore, reflecting an 11.4% increase compared to ₹1,487.9 crore in the same period of the previous fiscal yea

At the operational level, EBITDA (earnings before interest, tax, depreciation, and amortization) rose by 8.9% to ₹588.9 crore in the first quarter of the current fiscal year, up from ₹540.6 crore in the corresponding period of the preceding fiscal year. The EBITDA margin for the reporting quarter stood at 35.5%, a slight decrease from the 36.3% recorded in the corresponding period of the previous fiscal year.

For the quarter, the company's operating margins were reported at 15.2%, down from 16.2% in the first quarter of FY23. This decline was partly attributed to lower occupancy and an unfavorable payor mix.