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INDIA BUSINESS WORLD - 1st FEBRUARY - TO - 15th FEBRUARY - 2009
DLF-FORTIS PROPOSED JV FALLS THROUGH
A proposed joint venture (JV) between India's largest property company, DLF, and hospital chain Fortis Healthcare to set up multispecialty hospitals across DLF’s 31 townships has fallen through as the project has become unviable.
When contacted, the Fortis spokesman declined to comment. But a company official insisted that its stated target of 40 hospitals by 2012 through a combination of the organic and inorganic route remains on track. A DLF spokesperson said, "The memorandum of understanding (MoU) has not been renewed and the agreement is not binding on either of the companies."
A person who has knowledge of the development, on conditions of anonymity, said, "DLF was looking for a larger deal and wanted to have Fortis Hospitals in many of its townships. But, most of the proposed townships are not viable locations for hospitals, except two or three." The proposed JV would have moved ahead had DLF provided price incentives or other facilities, which it did not. Hence, there was no value for investing in townships and the MoU signed between the two companies has expired.
In 2007, DLF and Fortis had signed an MoU to float a 74:26 JV company to set up 250-400 bed hospitals in DLF’s townships with an investment of around Rs 6,200 crore. Fortis Healthcare is unlikely to tie up with any other property firm given the business slump real estate companies are facing. "Other real estate companies also have ideas for hospitals, but they are all sailing in the same boat," the official added.
The proposed partnership was seen as a win-win situation for both the companies as having a super-specialty hospital would have enhanced the value of DLF’s townships, besides meeting the regulatory requirements of having a healthcare facility. For Fortis, it fitted well with its plan to expand its footprint nationwide and increase its base to a total of 40 hospitals by 2012 by leveraging DLF’s land bank.
But, situations began to change last year as the Delhibased real estate company delayed many of its projects due to weak property demand. But the company had said its partnership with Fortis was intact and would jointly set up the hospitals.
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