MUMBAI (Reuters) - Shares in Fortis Healthcare (FOHE.NS) soared on Monday on the company's plans to raise A$270 million through divestment of its Australia dental business, a move that would cut its debt.
Fortis, India's No. 2 hospitals chain after Apollo Hospitals Enterprise (APLH.NS), runs healthcare facilities in Singapore, Malaysia, the Gulf and other Asian countries and had a consolidated net debt of $1.1 billion at end-June.
The company said it is selling its 64 percent stake in Dental Corp Holdings Ltd, Australia, to British medical services group Bupa to focus on high-end healthcare operations in Asia.
The entire proceeds will be used to reduce the group's debt, Fortis group Chief Executive Vishal Bali told news channel CNBC-TV18.
Some analysts were skeptical about the move as the Australian business, which had A$339 million in sales in the 12 months to June, was one of the key revenue generators for Fortis.
"Although prima facie the deal looks good, it will have a negative impact on a long-term basis," said Siddhant Khandekar, analyst at ICICI Direct.
The Dental Corp business has operating margins of 15 to 18 percent, which is higher than Fortis' overall operating margin, Khandekar said.
Fortis bought the Dental Corp stake in January 2011, hoping to expand the business across other regions but has been unable to do so.
It raised the number of dental practices in Australia and New Zealand to 190 from 140 in the nearly two years it owned the business, the company said in a statement late on Sunday.
Fortis shares were up 6.2 percent at 116 rupees on Monday morning, slightly below an earlier high of 117.35 rupees, compared to a 0.13 percent fall in the BSE Sensex.
Reporting by Kaustubh Kulkarni and Abhishek Vishnoi