Mega rights issue from Apollo

Apollo Hospitals Colombo, which last year changed ownership and management to Sri Lanka Insurance (SLI) from the Indian hospital group, wants to raise a billion rupees from a rights issue this month to take care of rising debt which is also over a billion rupees.

The company, which has retained some of its Indian staff after last year’s takeover developments and has now attracted more Sri Lankan medical professionals, said it was issuing 67 million shares to retire debt which is taking its toll on profits.“The interest component alone is Rs 150 million annually. The debt is due to a lot of bank interest. If not for this debt we are operating profitably,” noted Ajit Jayaratne, Chairman of The Lanka Hospitals Corp. Ltd, Apollo Hospital Colombo’s owning company.

He told The Sunday Times FT that proceeds from the rights issue were expected to roll in by January and by the 2008-09 financial year the company is hoping to recover from this burden.

The company said its total outstanding debt as at September 30, 2007 was Rs 1.25 billion, of which Rs 1.15 billion is made up of medium and short term debt. “The proceeds from the rights issue (Rs 1 billion) will be utilised to settle a significant portion of the medium and short term debt,” it said.

According to its annual accounts ending March 31, 2007, which was delayed in its presentation to shareholders, the post-tax loss for the year rose sharply to Rs 154.8 million against a marginal loss of Rs 6.8 million in the previous accounting year. Revenue was unchanged at Rs 1.8 billion. The 6-month results ending September 2007 showed a pre-tax loss of Rs 60 million.

The annual report, along with the six-months to September 30, 2007 accounts, was sent to shareholders last week. Asked about the delay in the annual report being finalised, Jayaratne said: “It was due to lot of accounting issues that we had when we took over in October 2006 and it took some time to put the accounts into some proper order.”

He said the presentation of the March-end accounts company in November was still within the exchange’s prescribed period for submission of annual accounts. Shareholders are entitled to three shares for every seven held at Rs 15 per share.

An EGM (Extra-ordinary General Meeting), seeking shareholder approval of the rights issues, will be held soon after the AGM on December 20 at the hospital auditorium. Jayaratne, in his statement to shareholders, said the hospital has reduced its charges in several areas to be more competitive while the overheads of running the establishment remain high.

Nearly 80 percent of the company is owned by SLI and Hatton National Bank, both controlled by business mogul Harry Jayawardene while the next largest shareholder is Property Development Ltd of the Bank of Ceylon Group, with 13.6 percent.
Jayaratne said the hospital is promoting medical tourism in a big way and has had patients from the UK. SLI will take up the balance of the rights issue if it is not fully subscribed.