The Hindu Business Line : Wockhardt firm on expansion; looking at alternative funding

Mumbai, Feb. 21 Wockhardt is looking at alternative avenues to fund the expansion of its hospital network, the Wockhardt Chairman, Mr Habil Khorakiwala, told Business Line. The Chairman’s statement comes just about a fortnight after Wockhardt Hospitals withdrew its initial public offering (IPO) from the market due to feeble response from investors.

The hospital major was looking to raise about Rs 800 crore to fund the setting up of new hospitals in the metros and smaller cities. But volatile market conditions had thrown a spanner in the works, leading to poor investor response and the eventual pulling out of the Wockhardt Hospitals IPO.

Plan B under study

Nevertheless, the company’s expansion plans (for its hospital network) will not get affected, Mr Khorakiwala said, indicating that the promoters were now exploring Plan B. Beginning with a hospital in Kolkata in 1989, Wockhardt Hospitals at present runs a network of 15 hospitals across the country, with a bed strength of 1,374. The company was looking to expand to 31 hospitals in two years and, 4,780 beds. It has already invested Rs 500 crore in its existing network.

Though details are likely to unfold in the near future on how Wockhardt Hospitals would raise funds to support its expansion plans, an industry watcher observed that it could rule out the IPO route for Wockhardt Hospitals in the near term.

Wockhardt Hospitals’ executives were tuned in to the market’s fluctuations, even as they had undertaken road-shows across the country and overseas. But it was not the only IPO to succumb at the market-place. Within 24 hours of the withdrawal of their IPO in early February, the IPO of Dubai-headquartered real-estate company Emaar-MGF too fell to a similar fate. The volatile markets took their toll even on Anil Ambani’s Reliance Power IPO, which when it opened was fully subscribed in 60 seconds. The leveller came later, when the share listed below its issue price.

Meanwhile, for Kerala-based electrical equipment maker, V-Guard Industries Ltd, that closed today – the issue was subscribed 2.7 times.

The IPO of Rural Electrification Corporation, a Government-backed power infrastructure company, was subscribed 4.13 times. The issue has one more day to close. But the extent of public support would clearly seem to suggest that the earlier robustness is missing.

“The reason why the current IPOs seem to have sailed through is because the markets have sort of improved and has somewhat started to stabilise. And also they are attractively priced. And, the issues are priced keeping in mind the valuations of the company,” said Ms Shahina Mukadam, Head of Research, IDBI Capital Markets Ltd.

Market-watchers say that there may in fact be a silver lining to the fallen IPOs.

Merchant-bankers and promoters will now be more sensitive to the valuations of the company and they would in future pay more attention to how they price the issues, said an analyst.