Fortis Healthcare Q2 net loss widens to Rs 1.6 bn; IHH deal gets CCI okay

The company noted in a statement that the net profit for Q2FY19 was primarily impacted by impairment of goodwill and investments

Fortis Healthcare’s (FHL’s) net loss widened to Rs 1.67 billion for the September quarter, though the hospitals and diagnostics entity showed an improvement in margins from the June quarter.

In the September quarter (the second one or Q2 of the financial year) of 2017-18, the net loss was Rs 459 million.

The company stated the figure for July-September this year was primarily affected by an impairment of goodwill and investments. Revenue was Rs 11.4 billion, marginally down from Rs 11.9 billion in Q2FY18. However, on a sequential basis, these were up from Rs 10.4 billion in Q1 this year. 

According to Bloomberg, expected revenue was Rs 12.2 billion, while a net loss of Rs 205 million was expected by analysts.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) was about Rs 1.4 billion. The Ebitda margin of 12.5 per cent was down from 16.7 per cent in the corresponding quarter last year but up from 7.7 per cent in Q1.

The hospital business' revenue was Rs 9 billion, from Rs 9.6 billion a year before. The diagnostic business' was Rs 2.35 billion, up from Rs 2.2 billion in Q2FY18. Hospital occupancy was 69 per cent, compared to 62 per cent in Q1 (it was 71 per cent last month).

“Operating profitability has seen significant growth, with Ebitdac (Ebitda and consulting fee expense) in the hospital business more than doubling to Rs 880 million from the trailing quarter. Our SRL business has also shown a robust improvement in profitability," said Bhavdeep Singh, chief executive.

Ebitdac is calculated before net business trust costs. Fortis pays a fee to RHT Health Trust for its hospital assets.

For the half-year ended September 30, revenue was Rs 21.8 billion, versus Rs 23.5 billion in the same period of FY18. Net loss for the period was Rs 2.3 billion, against one of Rs 404 million for the earlier corresponding period.

FHL said Northern TK Ventures, a subsidiary of IHH Healthcare, had got approval from the Competition Commission of India for a proposed majority equity purchase. The transaction would include fund infusion of Rs 40 billion, with a preferential allotment of 31 per cent stake to IHH, followed by an open offer by IHH for up to 26 per cent of the expanded equity capital of the company.

The capital raised would primarily go to complete the proposed acquisition of RHT's Indian assets, resulting in the elimination of the clinical establishment fee Fortis pays.

Ravi Rajagopal, chairman of FHL, said: "The impending investment by IHH would strengthen the business."