GIC Special Investments, the Singapore sovereign wealth fund, has picked 6.24 per cent stake in Fortis Healthcare (India), the hospital chain owned by billionaire brothers Malvinder and Shivinder Singh.
Lathe Investment Pte. Ltd., an affiliate of GIC, converted the foreign currency convertible bonds (FCCBs) it subscribed to last year at a price of Rs 167 per share.
Fortis scrip was quoting at Rs 130.55 in mid-day trades on Friday on the BSE, up marginally in a strong Mumbai market. The FCCB conversion was at 28 per cent premium to Fortis Healthcare's closing price of Rs 130.35 on Thursday.
The conversion of bonds into equity stake comes at a time when the Singhs brothers are selling their privately held healthcare services firm Fortis Healthcare International, which operates hospitals in the Asia-Pacific region, to their majority-owned, public-listed firm Fortis Healthcare for $665 million (Rs 3,274 crore), in the largest deal in the Indian healthcare services business.
GIC seems to have held a vast majority of the outstanding FCCBs of Fortis. The current value of the FCCBs converted, based on the conversion price and number of shares, is Rs 422 crore or around $80 million.
GIC had invested $100 million in Fortis' FCCB issue when it was in the fray for Singapore-based Parkway Holdings, where it was in a takeover battle with Malaysia's sovereign investor Khazanah. It was also planning to invest $84 million through a preferential share allotment (which was at Rs 170 per share) in Fortis, which was later postponed indefinitely. Fortis ultimately bowed out of the race for Parkway, selling its existing stake with a profit of $85 million.
In its investor presentation dated August 2011, Fortis valued the outstanding FCCBs on its balance sheet at Rs 454 crore.
The conversion of FCCBs would also reduce the debt burden on Fortis as it plans to initially fund the purchase of international unit through debt, taking the total debt of the combined business to around $1 billion.
"The net debt equity would rise to 1.18x post acquisition, based on our estimates. As per management, the target debt equity for the company is 1:1, which it believes would be achieved via capital restructuring," said brokerage firm Nomura in a report dated November 1. Nomura has a price target of Rs 170 per share on Fortis.
