Fortis Healthcare Doesn’t Expect Omicron Spread To Affect Operations

Fortis Healthcare Ltd. expects growth to recover in 2022 after slowing in the last few years.

The hospital chain, according to Ashutosh Raghuvanshi, its managing director and chief executive officer, expects to post an operating margin of 20% in 2022.

“We will have to work towards getting it to a stage higher than that though this would give us enough flexibility to grow faster because that would make our cash flows and balance sheet healthier,” he told BloombergQuint's Niraj Shah in an interview. “So even a consistent level of 20% gives us a very comfortable position for the growth which we have planned.”

Raghuvanshi said a surge in the highly transmissible Omicron infections across India may not affect their operations as the newer variant is likely to be milder. As a result, he said, hospitalisation rates would be much lower than that during the first two waves of the Covid-19 pandemic.

“That’s because of the behaviour of the virus itself, the new strain as well as the vaccination which might make the disease a little mild and the infrastructure is better prepared to handle it,” he added.

Acknowledging slower growth in non-Covid segments last year, Raghuvanshi said patients had postponed their elective medical procedures.

“So at least on the hospital side that was an important factor,” he said. “That’s now behind us effectively and that’s why I strongly believe that the recovery would be much better this year compared to what we had anticipated.”

Growth Obstacles

Fortis is awaiting court approval for its takeover by Malaysia’s IHH Healthcare Bhd that currently owns 31.2% stake in it. IHH is expected to make a mandatory open offer to acquire an additional 26% to become controlling stakeholder after vacation of stay order.

However, this is creating an “overhang” in the company’s relationship with banks and even at operational levels such as engaging doctors, he said. The company’s ability to expand through acquisitions and fundraising prospects are hindered until the legal case is resolved, Raghuvanshi said. “We do believe that this should get resolved in the short term.”

Fortis Healthcare reported revenue growth of 47.0% year-on-year to Rs 1,460 crore with hospitals and SRL (diagnostics) both growing at the same rate in the quarter ended September. Consolidated net profit surged to Rs 130.6 crore from Rs 15.47 crore.

Operating margin remained flat sequentially at 19.4%, and up from 14.6% a year earlier.