Indian hospital chain Fortis Healthcare is evaluating plans to launch a real estate investment trust, or REIT, to free up capital to fuel expansion, its finance chief said on Tuesday.
Yogesh Sareen said by consolidating real estate assets in a REIT and raising funds by divesting its stake, Fortis will be able to “grow faster with the same amount of capital”.
“This is under active evaluation. We don’t have a clear timeline on that or a clear yes or no on that,” he told reporters, after the company posted a 59 percent jump in quarterly profit.
A REIT is a fund that invests in commercial property and pays most of its rent to shareholders as dividends, which are usually higher than yields on government bonds and offer capital gains if property prices rise.
Sources had told Reuters in September that Fortis was looking to list a REIT in Singapore with a valuation of $600 million to $700 million and was trying to overcome certain regulatory hurdles. Sareen said options for listing the REIT or keeping it private were open, and an independent entity would value the properties and then the company would finalise the REIT’s valuation.
No banker has been given the mandate for setting up or listing REIT, he said.
Fortis has not yet decided on how much to raise through divesting stake in the REIT, Managing Director Shivinder Singh said.
NET UP, EXPANSION PLANS
New Delhi-based Fortis, controlled by billionaire brothers Malvinder and Shivinder Singh, said profit for the fiscal third quarter ended Dec. 31 rose to 345 million rupees ($7.6 million) on capacity expansion from 217 million rupees a year earlier.
Sales rose 60 percent to 3.67 billion rupees.
The company’s operating margins shrunk to 14.5 percent from 15.3 percent in the year-ago quarter as three greenfield hospitals became operational in September, Sareen said, adding margins would improve as the new hospitals stabilise.
Fortis plans to add 900 beds through commissioning of new hospitals and another 600 by expansion at existing hospitals in the next 12 months, Shivinder Singh said. Fortis has 4,500 operational beds at present.
The company does not need to raise funds for these expansion as it has 9.5 billion rupees in free cash, Sareen said.
At 2:17 p.m., shares in Fortis, valued at $1.25 billion, were trading up 4.8 percent at 146.70 rupees in a Mumbai market that was down 0.7 percent.