A day after the Board of Directors of the cash-strapped Fortis Healthcare Limited chose a binding bid for fund infusion and preferential share allotment from Hero Enterprise Investment Office (Hero) and the Burman Family Office (Burman), the winning combine is looking to raise their stake after the initial investment which will get them between 15-18 per cent equity right away. It's looking at a long term investment opportunity, and not a mere financial investment.
Once the transaction leads to an immediate infusion of Rs 1000 crore into Fortis, the suitors will go for a due diligence, and a possible increase in their equity soon after.
"Our offer is to put money directly into the company, and once we do that and once we have some insights into the workings of the company, then we will formulate the next strategy. I am not ruling out any possibility, as we understand the business a bit more, we will be happy to commit more money" Mohit Burman, director Dabur and representative of the Burman family office says.
In an exclusive interaction with Business Today, Burman said that they have confidence in the strengths of Fortis. "For the last 18 months people have been doing due diligence. All these companies like TPG, Manipal (the other bidders) had an opportunity to do that. I believe that whatever skeletons are to be uncovered are already in the public domain. Also these hospital assets are working, so we believe that whatever is known is known for everyone", he said.
The investors will seek three additional board seats on Fortis. "We will be nominating three non family, independent members. As we get more insights into the business, we will decide whether we should get on board or not", Burman said.
The Fortis management is likely to remain intact for some time as the investors would want to work with them for a period of time to understand the hospital business.
Burman also points out that the decision to retain SRL Laboratories within the Fortis hold, or to divest them to acquire the assets of Fortis from Singapore registered RHT will be taken after the due diligence. "Everything that we are suggesting or doing now is from looking at it from outside. So we have looked at two possible scenarios where SRL will be sold and the money will go to acquire RHT asset or it will be retained and we will come up with traditional funds to buy the RHT asset. Once we have discussions with the management of SRL, we will take the right decision", he explained.
The next move of the investors will be to meet all shareholders, present their case and convince them. There is likely to be some shareholder resistance as the board decision to choose Munjal-Burman combine was not unanimous, but a majority decision which saw five in favour of the deal, and three against.
Fortis informed the stock exchanges that the entire exercise involved a process that witnessed deliberation and recommendation by an Independent Expert Advisory Committee (EAC) comprising Deepak Kapoor, Former Chairman of PWC (India) and Lalit Bhasin, Chairman of the Indian Society of Law Firms along with financial advisors i.e. Standard Chartered Bank and Arpwood Capital. Cyril Amarchand Mangaldas as the legal advisor.