Fortis board approves the SRL acquisition; Valuation set by Avigo

Avigo Capital Partners has acquired 9.27% equity in Super Religare Laboratories Ltd (SRL) for Rs 100 crores. SRL is very pleased with this association on account of Avigo's understanding of the Healthcare space and at the prospect of future value creation. SRL is also very pleased at the expressions of interest by a large number of Private Equity Funds that were keen to associate with it.

The Board of Fortis Healthcare (India) Ltd in its meeting approved to acquire SRL on the third party valuation, based on the Private Equity Fund Avigo. Fortis had received an in-principal approval from its Board of Directors last week, to acquire ~86% stake in Super Religare Laboratories Ltd (SRL): one of India's largest and leading diagnostic services companies, offering diagnostic testing (including Pathology and Radiology), preventive care testing and clinical research trial testing.

Fortis Healthcare (India) Ltd's acquisition of SRL stake is clearly beneficial to both entities, as it will enable the delivery of end-to-end healthcare services to patients. The acquisition of controlling interest in SRL will create room for many new synergies between Fortis and SRL. In making SRL an integral part of its delivery network, Fortis will become an integrated player including expertise in pathology and radiology. It is commonly acknowledged that over 70% of all clinical decisions depend on diagnostic outcomes. SRL has a huge retail presence outside of hospital premises and a large number of its customers are found to need hospital intervention. SRLs accredited national network of pathology and radiology labs, with high reporting standards and rapid turnout capability will positively impact patient health outcomes. Fortis' existing healthcare delivery infrastructure will certainly be enhanced by the clinical synergy that will result from this acquisition.

Speaking on the developments, Shivinder Mohan Singh, Managing Director, Fortis Healthcare (India) Ltd said, "We look forward to building upon the Diagnostics business and expanding our presence into new segments. Fortis is committed to providing an integrated healthcare platform and continually seeks ways to enable Medical Inclusion in India and offer value-based medicine to patients." According to Dr Sanjeev K Chaudhry, CEO Super Religare Laboratories Ltd, "We are glad to be associated with Fortis and Avigo. As a constituent business of Fortis, we will create a formidable and unique healthcare delivery institution with excellence in both diagnostics and treatment. In addition to a beneficial impact on health outcomes, we will increase our ability to support medical innovation and clinical trials."

According to a report published by ICRA Management Consultancy Services Limited (IMaCS), the Indian diagnostic Industry is expected to grow at a 28% CAGR over 2009'2015, from Rs 59.1 billion to Rs 254.4 billion. In 2009, diagnostic revenues comprised of pathology Rs 41.1 billion (70%) and radiology Rs 18 billion (30%). Within the diagnostic space, according to the report, the Pathology Laboratory revenues are expected to grow at a CAGR of 28% over 2009'2015 and Radiology Laboratories at a CAGR of 26.5% over the same period.