100-Word Take | Fortis Healthcare lines up one more duck
Asset buyout will improve profitability but comes with a few side effects.
Ravi Ananthanarayanan
Fortis Healthcare has paid Rs 4,683 crore to acquire a bunch of its hospital assets from RHT Health Trust. This will be funded chiefly by the Rs 4,000 crore that IHH Healthcare invested to acquire a majority stake in Fortis. Its profitability will improve as a result.
In the September quarter, Fortis's reported margin was 6.6 percent but excluding the fees paid to RHT for using these assets, it would have been 12.5 percent.
However, depreciation on these assets will now show up in Fortis's financials and return on capital employed will get affected too. The long term benefit of this buyout depends on the ability to sweat these assets.
Original Source: https://www.moneycontrol.com/news/opinion/100-word-take-fortis-healthcare-lines-up-one-more-duck-3402331.html