Smoke clouds Emami Groups ambitious expansion plans

Hospital chain was in the process of spending around Rs 2,000 crore to expand business.

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The ambitious plans of Advanced Medicare and Research Institute AMRI Hospitals Ltd,controlled by the Rs 3,000-crore Emami Group,are likely to take a big hit following Fridays devastating fire.

The hospital chain,which is strong in the east,was in the process of spending around Rs 2,000 crore to expand business and double revenue to Rs 500 crore over the next two years.

The group is setting up seven hospitals across north and east India with an investment of Rs 1,750 crore. It was planning to invest another Rs 300 crore to expand existing hospitals. Now we dont know whether it will be able to rebuild its image and reputation. Raising funds would be a big problem, said a research head with a leading brokerage who did not wish to be identified.

Emami,managed by Kolkata-based R S Agarwal and R S Goenka,has a 66 per cent stake in AMRI; Kolkata-based developer Shrachi controlled by S K Todi has 30 per cent,and the West Bengal government has the rest.

Repeated phone calls and emails didnt elicit any response from the promoters of the hospital. A company official,however,stressed that contrary to speculation of arrests,kindly be informed that all six directors have surrendered. They are R S Goenka,S K Todi,Manish Goenka,Prashant Goenka,Ravi Todi and D N Agarwal.

Emami,now a leading ayurveda-focused,health,beauty and personal care products company,was begun by Agarwal and Goenka who left jobs with the Birla group and put Rs 20,000 into their new venture. Three decades later,group flagship Emami Ltd is a Rs 1,200-crore company; the Emami Group is worth Rs 3,000 crore.

Analysts tracking Emami said the group is financially strong,and capable of handling liabilities like compensation claims arising from the fire. The company posted a net profit of Rs 50 crore for the quarter ended September 2011,as compared to Rs 56 crore for the corresponding quarter last year.

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Total Income has increased from Rs 264 crore for the quarter ended September 2010 to Rs 305 crore in the corresponding quarter this year. For the fiscal ended March 2011,it posted a revenue of Rs 1,221 crore,and a net profit of Rs 227 crore. Its cash EPS for the year was Rs 22.70 and operating profit margin was 30.44 per cent.

Emami spent close to Rs 700 crore to acquire a major stake in Zandu Pharmaceuticals Works recently. AMRI had proposed to acquire Ahmedabad-based Sterling Hospitals,which is controlled by private equity firm Actis. The Rs 250-crore Sterling has 1,000 beds in four multi-specialty tertiary care hospitals. AMRI exited the race after deciding against topping its final Rs 640-crore offer.