MUMBAI -- The battle to take control of India's second largest hospital chain has grown more intense in the run up to today's company board meeting, with a Chinese group entering the race and a Malaysian rival improving its offer.
The board of Fortis Healthcare will meet later today to consider bids from various suitors.
The company operates health care delivery services in India, Dubai, Mauritius and Sri Lanka and has a total of 45 facilities, including projects under development, around 10,000 potential beds and 314 diagnostic centers.
On Thursday morning, Fortis informed Indian bourses that IHH and joint bidders Hero Enterprises and Dabur India had submitted revised offers for the company.
IHH has proposed to inject up to 40 billion rupees ($608.2 million) through preferential allotment of shares in an improvement on an earlier offer of 160 rupees per share.
Major Indian industrial groups Hero and Dabur offered to pay 15 billion rupees directly to the company. Earlier, smaller rival Manipal Healthcare also revised its offer by 20% to 60 billion rupees after minority shareholders had raised concerns over a low valuation.
The Indian health care market is predicted to grow threefold in value terms to $372 billion by 2022, clocking a compounded annual growth rate of 22%, according to a joint report by industry bodies Assocham and RNCOS.
The three bids were received in a matter of days after the company was put up for sale.
Fortis Healthcare is under investigation by the Indian authorities over allegations of regulatory lapses on transferring funds to companies linked to owners Shivinder Mohan Singh and Malvinder Mohan Singh without board approval.
Japanese pharmaceutical company Daiichi Sankyo, with which the Singh Brothers-linked Ranbaxy Laboratories split acrimoniously in 2015, has approached the Securities and Exchange Board of India requesting the sale of Fortis be blocked, claiming it would violate court orders by including the assets of the hospitals.
Malivinder Singh and Shivinder Singh resigned from the board of Fortis Healthcare in February after the Delhi High Court upheld the 35 billion rupees international arbitration case award in favour of Daiichi Sankyo.
Whichever bidder wins out will be able to take advantage of one of the fastest growing sectors in India, an industry with high entry barriers due to considerable investment requirements, according to industry sources.
"The controversy against the owners notwithstanding, Fortis is the best asset currently with its large network and infrastructure," said a source with extensive knowledge of the industry.
According to global consulting company Deloitte, the Indian health care sector has been growing at a double-digit rate due to an increase in disposable income and greater health insurance coverage. Other contributing factors include a rise in the number of cases of lifestyle diseases, increased life expectancy and a boom in medical tourism.
However, providing access to high-quality, affordable health care is a challenge in many parts of the country. Deloitte estimates that, with less than 1 physician per 1,000 people, India is well behind its peers and needs an additional 3.6 million hospital beds to reach the capacity it requires.
"Only about 27% of India's population is covered by any form of health insurance and the out-of-pocket expenditure on health is 62.4% in India as compared to the world average of 18.2%," it said in a note.
According to PwC India, access to capital has been one of the biggest hurdles to growth. Currently, the Indian government spends about 1% of gross domestic product on health care, but the country's National Health Policy aims at increasing this to 2.5% by 2025.
"The National Health protection scheme will greatly enhance assesibility to care for over 400 million Indians," said Rana Mehta, Partner and Leader Healthcare, PwC India. "While the demand for healthcare has risen exponentially supply side constraints continue to slow the growth especially in the rural areas".
Private sector participation has been a major boost to delivery, at least in urban centers. In the past decade, there has been considerable interest from private players and an increase in foreign direct investment.
In 2015, IHH Healthcare bought a 73.4% stake in Ravindranath GE Medical Associates, which ran the Global Hospitals brand, for 12.84 billion rupees. Fosun International acquired a 74% stake in Gland Pharma for $1.1 billion last year.
Bangalore-based Sakra is 100% owned by Japan's Toyota Tsusho and Secom Hospital.