Fortis: Providing Solutions for disease I
Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Stock Synopsis
Forum Discription: A bried discussion of companies on very specific matters. Normally this is the prelude for further research as always members would be discussing quality companies with good management only
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=2431
Printed Date: 21/Apr/2025 at 3:09pm
Topic: Fortis: Providing Solutions for disease I
Posted By: venkat
Subject: Fortis: Providing Solutions for disease I
Date Posted: 03/Oct/2009 at 10:29pm
|
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.
 ------------- Life is always a fight....to finish at the start line. Problem-Use challenge, Tension-Use excitement,Ican't-Use i can,avoid no at the beginning of sentence. |
Replies:
Posted By: Crimsonarcher
Date Posted: 13/Mar/2010 at 8:10pm
| Again the indian promotors at their finest...they have increased their shareholding from 65% to 76% in the company by issuing rights and warrants to themselves at 100 rs a share, while it rules at 180 now. also have pledged some 10% of their holdings to finance this. They talk about a Equity:Debt ratio of 1:1, but the stock trades at a P/E of 400+...i have no idea why..if this were to fall to more realistic levels....then they would be in trouble! |
Posted By: j2eeprofessiona
Date Posted: 16/Mar/2010 at 10:58am
the prices were around rs 68 when the rights issue was approved by the board. not sure if i understand this.... how is equity:debt has any connection with PE? |
Posted By: Crimsonarcher
Date Posted: 17/Mar/2010 at 12:09pm
| Well i agree with your point that PE has no bearing on Equity:Debt, but the stock quotes at such astronomical levels...P/B is close to 6+, while P/E is 400+...promoters are using the high valuations to issue out more equity and thus garner cash as share application money. I have no idea why would investors buy into it at these levels... |
Posted By: FutureBull
Date Posted: 17/Mar/2010 at 1:05pm
|
I am invested in Fortis for last few quarters and observed that some of the hospitals which have stabilised are giving EBIDTA margin of 25% at less than 70% occupancy rates and you know very few cos/sector can provide that. Wockhard acquisition has been EPS accretive so that was another positive.. Pakway acquisition will provide paradigm shift despite being little expensive one Fortis will become global healthcare play. You would know that Parkway has been at the forefront of medical tourism in south east Asia..
we do one mistake in evaluating hospital stocks that they are capital intensive.. that's true but one fact which can change all that is "Clinical Research Services".I think it will flow to hospitals with large and diversified catchment area..Fortis will benefit significantly in long run ------------- ‘The market always does what it’s supposed to — BUT NEVER WHEN’. |
Posted By: j2eeprofessiona
Date Posted: 17/Mar/2010 at 2:14pm
well, not every business can be evaluated on a basis of PE ratio. Look at the opportunity it is sitting on .... its humoungous .... |
Posted By: Crimsonarcher
Date Posted: 17/Mar/2010 at 3:21pm
|
Yar its not just about the opportunity but also profitability. If they dilute equity so much, nothing would be left for existing shareholders. Also you have to look at the P/E for a company that is valued at $1Bn..had it been much smaller you can still have some leaway. Also the opportunity might be big, but there is no sustainable advantage...there are many similar players and regional players also who provide the same service without the frills of a corporate player. Also if it was so obvious how come RJ is not taking a position in this? |
Posted By: FutureBull
Date Posted: 17/Mar/2010 at 6:40pm
|
it was obvious that India would grow and need huge amnt of cement to grow but RJ despite being bullish on India missed Cement boom.. accepted by him in one of the interviews... ------------- ‘The market always does what it’s supposed to — BUT NEVER WHEN’. |
Posted By: mane.ramesh
Date Posted: 23/Feb/2011 at 6:46pm
|
two sardarjis are serious punters and not serious business mans apollo hospital is comparatively much better bet ------------- investment elephant blind |
Posted By: mane.ramesh
Date Posted: 23/Feb/2011 at 6:47pm
|
look at this very nice business by apollo hospitals http://www.telemedicineindia.com/ ------------- investment elephant blind |
Posted By: subu76
Date Posted: 23/Feb/2011 at 7:31pm
I thought he made a bunch of dough on ACC back in 90s
|
Posted By: Kautilya
Date Posted: 23/Feb/2011 at 8:15pm
I think that is very subjective. I had a chance to hear his talk a few months back and he seem to be very ambitious and also sensible. When questioned about how they dealt with Wockhardt, his answer was very clear and gave an impression that he understood the business he was getting into it. |
Posted By: rajnsharma
Date Posted: 23/Feb/2011 at 9:12pm
I agree that they are very ambitious and creating new businesses with ease. However, I am not sure how much wealth they would generate for Investors in long run. ------------- Wall Street makes money by it's activity, while you can make money by your in-activity - Warren Buffett |
Posted By: barla
Date Posted: 23/Feb/2011 at 11:33pm
No doubt he has to be very clear about hwy he ought wockhardt. Point is will he be etchical while dealing with us the small shareholder.
|
Posted By: Kautilya
Date Posted: 23/Feb/2011 at 6:37am
That's correct. My only point was that the two sardarji's are highly competent and have good business acumen.
|
Posted By: basant
Date Posted: 25/Jun/2012 at 10:34am
|
Now why should #Fortis a hospital company get into renewal energy?Classic case of diworsification!
http://www.moneycontrol.com/news/buzzing-stocks/fortis-health-eyes-26-stakerenewable-energy-cosstk-up_722520.html via @moneycontrolcom ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: subu76
Date Posted: 26/Jun/2012 at 8:37pm
| Also, we need to know the level of promoter interest if any in the company,. |