Healthy Growth On The Indian Terrain

Fortis Healthcare is expanding its network with a mix of acquisitions and greenfield units without compromising on profitability.

India’s second largest private healthcare company, Fortis Healthcare, has turned in net profits for two quarters in a row for the first time since starting operations in 2001. The company recorded profits of Rs 10 crore in the September quarter and about Rs 70 lakh in the preceding quarter on revenues of Rs 167 crore and Rs 148 crore, respectively.

The healthcare services provider, which runs a network of 22 hospitals across the country with a capacity of just over 2,500 beds, was able to achieve better numbers by controlling costs, improving its capacity utilisation and rightsizing its medical staff. Though the multi-speciality healthcare provider is making investments in expanding its geographical network and acquiring hospitals, it believes that it has reached a size which will allow expansion without compromising on margins and profitability.

TheEscortsmakeover
One of the major reasons for the turnaround of the company is improvement in operating margins at the 300-bed Escorts Heart Institute, Delhi, and the largest in its hospital network. The departure of a key personnel including Dr Naresh Trehan last year had dealt a severe blow to the brand as well its operations leading to a drop in occupancies. The cost cutting measures and rightsizing of staff which included moving part of the nursing staff to other locations has helped Fortis move from Ebidta levels of 9 per cent earlier to 14 per cent in the current quarter on the back of 70 per cent occupancies and revenues of Rs 51 crore during the quarter.

The management believes that there is scope to increase operating profits to about 20 per cent of revenues. The hospital also got a boost when noted cardiologist Dr Ashok Seth, who had left the hospital to join Max Healthcare three years ago, joined back and is now the chairman of the Escorts Heart Institute. The company is bullish on growth prospects at Escorts as well as its units across the country as it believes that the cardiac market is underserved. It estimates that while there have been about 2.5 lakh cardiac-related surgeries (Rs 1.5 to Rs 2.5 lakh per patient) over the last 15 months in the country, the market is estimated to be 10 times as much at about 2-2.5 million per year.

Expansion
Fortis wants to add 400-600 beds to its existing capacity in the current fiscal which will take its total capacity to 3,000 beds. While 150 beds will be added at the Vashi, Mumbai facility which will start full-fledged operations next month, the balance will come from acquisitions the company is planning over the next four months. The company is setting up two greenfield facilities at Shalimar Bagh, New Delhi, and Gurgaon with a capacity of 258 beds and 350 beds, respectively.

These are to go onstream in June 2009 and January 2010, respectively. The company plans to invest Rs 400 crore in expansions in the current fiscal. While Rs 100 crore is being invested in the two greenfield facilities, Rs 40 crore is being utilised for expanding the current facilities. The company intends to use the remaining to fund its inorganic initiatives. The management does not feel the need for equity infusion to fund its growth initiatives and believes that at a debt to equity of 0.5 it is comfortably placed to meet future requirements.

Source: business-standard.com Contributed by: DMSMedwire Research JSG Team