Fortis: Providing Solutions for disease I

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    The Plan
Fortis Healthcare says it will overtake Apollo Hospitals soon, and establish itself as a clear market leader in India.

The sale of Ranbaxy netted 37-year-old Malvinder and brother Shivinder Mohan Singh, 34, some Rs 10,000 crore in cash.The sale couldn’t have been better timed —  from the sellers’ point of view. Within weeks of the deal being announced last year, the global financial markets crashed and the world entered the worst economic crisis in over half a century. At the same time, long-pending regulatory issues with the US Food and Drug Administration began to surface, eventually leading to the ban on 30 of Ranbaxy’s drugs in the US. This left new owner Daiichi Sankyo with many problems to contend with. Ranbaxy’s stock fell to an all-time low of Rs 133 in March 2009 at the Bombay Stock Exchange, compared to the price of Rs 737 a share that Daiichi Sankyo paid. A collapse of 82%!!!!!!!!!!!!!!!

Today, the group’s total revenues are barely Rs 2,000 crore, against Ranbaxy’s Rs 7,421 crore. Total market capitalisation is Rs 7,025 crore compared with Ranbaxy’s Rs 16,783 crore.Healthcare flagship Fortis Healthcare is half the size of leader Apollo Hospitals.Following the acquisition of Escorts Escorts Heart Institute And Research Centre in 2005 and Wockhardt’s 10 hospitals last August, Fortis is already bigger than uncle Analjit Singh’s Max group. But Apollo is still way ahead. Fortis’s Rs 631 crore revenue for the year ended March 2009, added to Wockhardt’s hospitals’ Rs 313 crore still takes the Fortis group’s combined turnover to Rs 944 crore, compared with Apollo’s Rs 1,614 crore in the same year.

The Rs 10,000 crore corpus has been deployed owned 50:50 by the two brothers. Invested wisely, the Rs 10,000 crore would earn between 10 per cent and 15 per cent by conservative estimates. That is Rs 1,000-1,500 crore annually.With the Wockhardt acquisition, Fortis will have 38 hospitals, including 12 smaller satellite and command centres, and 5,180 beds, bringing the group, at one stroke, comfortably close to the target — 40 hospitals and 6,000 beds — it had set for 2010. 

The healthcare market in India is set to double to $80 billion by 2013, from $40 billion today.Take a prosperous and growing middle class, add a rising incidence of lifestyle-related diseases and an ageing population, and you have a great business opportunity. However so far, these factors have not translated into windfall profits for entrepreneurs. While Fortis clocked in revenues of Rs 631 crore in the year ended March 2009, its net profit margin stood at just 3.3 per cent, worse than any old manufacturing business. Nevertheless, hospital chains continue to invest in the hope that better scale will translate to profits in future.