Fortis Healthcares Grade Revision By Crisil Research

Fortis Healthcares Grade Revision By Crisil Research

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CRISIL Research has reduced the grading of Fortis Healthcare (India) Ltds to 3/5 from it earlier grading of 4/5. The grading has been revised but the companys fundamental are relatively good as compared to the other equity securities in India. CRISIL Research has assigned a grade of value 4/5, it indicates that the market price has a upside from the current levels of Rs. 92 dated: January 05, 201. One year fair value of the stock is Rs. 112. The fundamental grades cannot be held as crucial criteria for buying, selling or holding the graded instrument. One cannot also comment on the future of the instrument market price or its suitability for a particular investor.
Financial performance was below par in the last two quarters, a bit of delay in the ramp-up of their diagnostic business (Super Religare Laboratories). One of the main reasons for the revision of the fundamental grade of the Fortis healthcare (India) Ltd is concerns over the international business acquisition. There was a strong revenue growth in the first half of the financial year 2011 due to the acquisition of SRL in May 2011 but the revenue growth declined considerably in the later part of the year. The reason for the decline in revenue was due to the increased interest cost and reduction in the other sources of the income. The ramp-up of the SRL stocks is slow and in addition the business is currently showing loss due to which the scenario is not bound to change much in 2012. There is a huge expectation that the business may turn profitable in 2013.
Fortis will continue to acquire international businesses from its promoters which will maintain the belief of its valuation. The successful integration of the international business with the domestic operation will be challenge for the Fortis. Fortishas a weak disclosure level of its inter-group transactions including loans and advances which is a basic reason for lessening the comfort level of CRISIL Research on Fortis. The Revised grade of Fortis is supported by the leading position in the Indian healthcare business industry. There is a great amount of expectation that the Indian healthcare industry will grow at a rate of 12% for next 5 years allowing it to touch Rs. 4200 billion mark by 2016. Fortis has a leading position which will result in brand recall and addition of approximately 4000 hospitals over next 5 years will definitely help Fortis in capturing the growth.

About the Author:
CRISIL Research - Rating Agency which provides ratings to various institutional setups, organizations, etc on various parameters. They have a rich and globally-diversified client base customers ranging from small enterprises to the largest corporations and financial institutions. They also work with governments and policy-makers in India and other emerging markets in the infrastructure domain.



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