Vision to go public with SRL remains intact

Written by Soma Das | Updated: Jun 14 2012, 06:47am hrs
Fortis Healthcare on Tuesday announced its plan to raise R370 crore by offloading a stake in its diagnostic firm Super Religare Laboratories (SRL) to International Finance Corporation, the World Banks investment arm and Mauritius-based NYLIM Jacob Ballas India Fund. While NYLIM Jacob Ballas India plans to invest R250 crore in the diagnostic firm, IFC would pitch in R120 crore. The investments would be made in the form of compulsorily convertible preference shares. The conversion of the preference shares will be in the price band of R201 to R220, Fortis said in a statement. After conversion, Fortiss equity stake would stand at around 55-56% in SRL. The transaction, expected to take place within this month, would help SRL shed a substantial chunk of its debt. Vishal Bali, the Singapore-based global CEO of Fortis Healthcare, shares the companys future plan in a telephonic chat with FEs Soma Das. Edited excerpts:

How much of the infusion would go towards retiring debt and how much would be used for SRLs expansion

A majority of the R370-crore infusion would go towards retiring the debt. That is because, a significant amount of capital investment towards expansion and consolidation plans of SRL has already been incurred last year. We dont see capex activity of that level to be repeated this year.

Currently, SRL has a debt of around R422 crore. This infusion would help it become almost debt free. This would also help SRL stay PAT (profit after tax) positive. This would also be great for Fortis Healthcare (parent firm), which has had to absorb losses of SRL for some time. In a nutshell, the financial indicators of SRL would start looking much healthier now.

Could you share SRLs expansion plans

We already have eight reference labs and around 200 network labs. Within the last one year, SRL has scaled up significantly. From 810 collection centres at the end of 2011 fiscal, we touched 1,100 centres at the end of 2012 fiscal.

From a doctor coverage of 45,000 at the end of 2011 fiscal, we have been able to expand coverage to 73,000 doctors by the end of 2012 fiscal. These, as well as strengthening of our reference labs in Bangalore and Kolkata have been the focus. In future, the idea is to increase the number of collection centres by 10-15% annually. Also, taking SRL to Colombo, Sri Lanka to work with Lanka Hospitals (in which Fortis has 28% stake) is in progress.

There is uncertainty on IPO plans of SRL. Could you give an update on that

In these times, when markets are so bearish, the decision of IFC and NYLIM Jacob Ballas India to invest in SRL is indicative of two stories they believe in.

Firstly, it demonstrates their confidence in SRLs prospects as a leader in the diagnostics market. Secondly, it proves their belief in the immense opportunities waiting to be explored in the Indian diagnostics market. As far as going public with SRL is concerned, the vision to do so remains fully intact. It is just a question of when. Looking at the complexion of the markets today, predicting a time line is difficult. But we are waiting for the right time to go public.