Fortis Healthcare Ltd., India’s second-biggest hospital operator, agreed to sell its 64 percent stake in Australia’s Dental Corp. to Bupa for A$270 million ($284 million), citing limited expansion opportunities.
Fortis shares surged as much as 9.4 percent to 119.50 rupees in Mumbai trading, headed for the biggest gain since July 2009, before trading at 117.20 rupees at 12:21 p.m. The stock is the second-biggest gainer on the BSE 500 Index today.
The sale is “in line with Fortis’s strategic decision to focus on health care in Asia including India,” the New Delhi-based hospital operator said in a statement today.
Fortis, which initially invested in Dental Corp. in January 2011, later increased its shareholding and added 50 clinics to the 140 dental practices in Australia and New Zealand, the Indian company said. The model “has remained confined to the two countries and, in spite of exploration and backing, has found limited acceptance in other Fortis geographies,” it said.
The sale is expected to be completed in March, subject to shareholder and regulatory approval, Fortis said.
Dental Corp. brought in 28 percent of revenue for Fortis in the year ended March 31, making it the biggest contributor to sales outside India, according to an Aug. 20 corporate presentation.
Bupa will own 100 percent of Dental Corp. on completing the deal, it said in a separate e-mailed statement. The London-based company already sells health insurance, and runs aged-care homes and retirement villages in Australia and New Zealand, Bupa said.
Fortis’s “reason for selling the business because they can’t replicate the model in Asia is difficult to digest,” Siddhant Khandekar, an analyst at ICICI Direct, said in a telephone interview. “They are selling off their most profitable unit and the ebitda is going to drop going forward.”
Dental Corp. had an earnings before interest, taxes, depreciation and amortization margin of 18 percent in the quarter ended Sept. 30, making it one of the most profitable entities in the Fortis portfolio, according to an investor presentation on its website. Fortis’s India business had an ebitda margin of 13.8 percent in the same period.
Fortis on Oct. 19 listed its hospital assets on the Singapore Exchange through the Religare Health Trust, raising S$511 million ($419 million). The business trust will invest primarily in health-care assets in Asia, Australia and emerging markets in the rest of the world, Religare said in its prospectus.