Sunil Kant Munjal, chairman of Hero Corporate Services Ltd. and joint managing director of Hero Motocorp Ltd. (Photographer: Graham Crouch/Bloomberg)

Hero’s Sunil Munjal Says Fortis Needs Fund Infusion, Not A Complex Merger Deal

Hero group’s Sunil Munjal, who has partnered with the Burmans of Dabur India Ltd. to bid for Fortis Healthcare Ltd., said India’s second largest hospital chain doesn’t need a complex deal but a fund infusion.

Manipal Health Enterprise Pvt Ltd. has offered a “very cumbersome” and “complex” restructuring deal to Fortis shareholders, Munjal told BloombergQuint in an interview. “That will require many, many months. At this moment the company does not need that kind of diversion.”

The proposal by Hero Enterprise Investment Office and the Burman Family Office comes at a time when Fortis also has a rival offer from IHH Healthcare Bhd. for its hospitals and diagnostics businesses, according to Bloomberg. The Munjals and the Burmans have offered to invest Rs 1,250 crore directly into Fortis through a preferential allotment, according to an exchange filing. The board of Fortis is currently evaluating this offer.

If this investment is accepted, Hero and Burman group entities will hold close to 15 percent in the hospital operator compared with the current 3 percent, making them the largest shareholder.

Hero offered an immediate capital infusion of Rs 500 crore which will help the company run its day-to-day functions. The remaining Rs 750 crore will be infused after due diligence is completed in another three weeks, Munjal said. That will help the healthcare company with its medium term growth needs.

“We think we’re putting more than the company needs. This is a good operation,” he said. “By just improving efficiency it will start throwing up much more cash itself.”

Here are the key highlights of what Munjal, chairman at Hero Enterprise, told BloombergQuint about the rationale behind the Fortis offer.

  • Overhang of legal issues on erstwhile promoters held us back from making investments in Fortis earlier.
  • Will pay Rs 500 crore cash immediately as Fortis requires liquidity to function.
  • Fortis does not need more than Rs 300-500 crore at this time.
  • The remaining Rs 750 crore is for medium-term growth.
  • Fortis needs to focus on increasing efficiency in day-to-day healthcare management and scaling-up business.
  • Daiichi Sankyo case will have no impact on Fortis deal.
  • Manipal has offered a cumbersome, complex restructuring deal to Fortis shareholders.
  • Fortis does not need complex deal to grow, sustain operations.

Watch the full conversation here.

(Corrects an earlier version that misstated that Munjal is still a joint managing director at Hero MotoCorp)