Escalating the suspense surrounding the battle for reins of Asia?s largest hospital chain Parkway Holdings, GIC Special Investments, the Singapore government?s investment arm, deferred its plan to make a committed investment of Rs 380 crore in Fortis Healthcare. Instead, Fortis informed stock exchanges that GIC would like to consider participating in a larger fund-raising announced by Fortis after its board met on June 9.
While the statement elicited mixed response from analysts, the market did not take the cue favourably with the Fortis scrip plunging 1.82% to close at Rs 153.55 on Thursday on the BSE, while the benchmark 30-share Sensex fell 0.88%.
?While on the face of it the statement may appear to give the impression that GIC could be interested in making a larger investment in the company sometime later, there is a strong likelihood that it is not so in spirit,? a banker said.
Considering there are very few options for investment in the healthcare segment in Asia and particularly India, given the the size and scale of Fortis, this seems to be a studied decision on the part of GIC and clearly linked to the ongoing tussle between the Malaysian government?s investment arm Khazanah and Fortis for the control of Parkway. However, the GIC statement said it ?remains committed to Fortis through our substantial investment in Fortis? convertible bonds. Like any investor, we constantly review our investments and will evaluate participating in the larger fund-raising by the company as per the resolution passed in the board meeting dated June 9, 2010 and defer the preferential investment until such time.? Still, none of the analysts were ready to discount the involvement of the ongoing scuffle at Singapore in the decision.
Some analysts felt that if GIC was really keen on continuing its association with Fortis, it could have retained the 6.58% in Fortis and considered raising its stake later, considering that it would not have had the compulsion to shell out the entire money at one go. Others felt that being a government investment arm, it is extremely conscious of its image and would not like to be seen as publicly reneging on a commitment. Yet others speculated that Khazanah and GIC being conservative government investment arms would not like to be seen as engaging in a fight from opposite sides in full public glare.
However, most of them refused to be quoted, given the sensitive undertones the entire issue has assumed. And none of them could completely rule out GIC buying out deeper into Fortis at a later stage, even though most believe that an announcement of this nature at a time when the Fortis board has passed a resolution to raise funds doesn?t augur well for India?s second-largest corporate hospital chain.
?The statement doesn?t necessarily mean GIC is committed to the cause of Fortis,? said Ranjit Kapadia, vice-president, institutional research, HDFC Securities. GIC may not be willing to pay a premium of 11% on the current market price of Fortis and that may have led to the deferment of allotment, he added. In general, there is consensus that once Fortis announces its pending decision on whether it wants to launch a counter-offer to Khazanah or exit Parkway and brings more certainty to the situation, all related threads of chaos would get disentangled. The Singapore securities market regulator has allowed Fortis time till July 30 to decide whether it wants to make a counter-offer for Parkway.
After Fortis bought US private equity firm TPG?s over 23.9% stake in Singapore-based Parkway in March, it reached an agreement with GIC to sell 6.58% stake in the company for Rs 380 crore. The decision of sale was approved only recently in June after Khazanah launched its open offer to increase its stake to 51.5% from 23%. This threatened Fortis? position as the largest shareholder (with 25.3% stake) in Parkway at a time when the Indian company planned to use it as a springboard for creating a global healthcare model.