>FORTIS HEALTHCARE (CITI)

Takeaways from Our India Investor Conference, June 24-26

Takeaways from Mumbai — Fortis Healthcare attended our India Investor Conference on June 25. Here are some key takeaways from management:

■ Long-term vision — Fortis expects to have a network with c6000 beds by 2012 (at an expected cost of cRs7m/bed for new beds). It is also trying to create an asset-light structure by entering more O&M contracts, which will help expand reach and grow top line without increasing its asset base.

■ Updates on key projects — A) Shalimar Bagh: Expected to come online within three months. It will be operational from the next quarter. Phase I will have 258 beds. B) Gurgaon: Expected to be operational within the next 12 months with 350 beds. C) Escorts: Revenues close to earlier peak levels (before Dr. Naresh Trehan's exit) with lower ALOS, leading to higher margins (c20% towards the end of FY09). FY10 will be a good year for Escorts Delhi.

■ New O&M deal announced — Fortis has entered into an O&M contract with S L Raheja hospital in Mumbai. This is the second Mumbai hospital in Fortis' network and diversifies its geographical spread. The hospital has 280 operational beds and Fortis will get a share of the EBIDTA and if it can expand EBITDA margins beyond a certain threshold, it would share in the upside.

■ Other takeaways — 1) Rights issue to open in mid-July (expects to close by August). SEBI approval has been received; 2) Expects established hospitals to reach c23-25% EBITDA margins (Mohali, Noida, Amritsar already at these levels); 3) Dr. Balakrishnan, one of Chennai's eminent doctors, has joined at Malar; strong revenue growth likely in FY09; 4) Board meeting on 30th to announce FY09 results.

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