New Delhi-based Fortis group is ready to purchase stakes in Chennai-based Malar Hospitals Ltd.

The group has signed up an agreement with the Chennai-based Malar Hospitals promoters’ to buy 28 per cent of the holdings through International Hospital Ltd - a wholly owned subsidiary of Fortis Healthcare Ltd (FHL) - and Oscar Investments Ltd.

Fortis will also make an open public offer to take over 20 per cent stake from the public. The transaction will mount Fortis’ entry into south India.

While annunciating the deal with Malar Hospitals’ promoters to the media-persons, Anil Panwar, president, governance and growth, FHL stated that the 180-bed hospital has an earning potential of Rs.4 million per bed annually.

Fortis group would invest between Rs 200 and Rs 250 million for up-gradation of the facilities and forming it into a specialist heart care centre in the city.

Daljit Singh, president, strategy and organizational development. FHL, stated, “Our team will study the set up in Malar Hospitals and decide on the future course of action.”

Mr. Daljit added that FHL is also looking for further deals in Chennai.

The parties mutually arrived at an enterprise value of Rs 570 million for Malar Hospitals.

According to the deal, International Hospitals would purchase Malar Hospitals’ promoter stake of 28 percent. The overall equity capital base of Malar Hospitals stood at Rs 13.9 million.

Additionally, International Hospitals and Oscar Investments would lend Malar Hospitals Rs 10 million and Rs 4 million, correspondingly. Malar Hospitals would make use of the amount to settle-down its institutional arrears.

"The loan would be converted into equity at a later date. The converted equity will be around 25 per cent of the expanded capital base of Malar Hositals," stated Panwar.

The International Hospitals and Oscar Investments will hold 18 and 7 per cent of share respectively. International Hospitals will make a public offer to buy 20 per cent of the 70 per cent public holding at Rs 30 a share.

Hinging upon the reaction to the public offer, Fortis group through International Hospitals and Oscar Investments would command anything between 46 to 66 per cent of the stake in Malar Hospitals.