Chennai: The Tiruchirapalli-based closely held Kaveri Medical Centre and Hospital is in advanced stages of acquiring the publicly listed 175-bed super specialty Seahorse Hospitals Limited, also located in Tiruchirapalli.

Confirming that the acquisition talks are in advanced stages Kaveri Medical Centre''s managing director Dr S Chandrakumar said, "We have agreed in principle to acquire Seahorse Hospitals. However, a few finer points are remaining to be settled."

These "finer points" are believed to be over the valuation and the final purchase price. Moreover, Kaveri Medical Centre is still in the process of completing it''s due diligence audit of Seahorse Hospitals.

For the Rs16-crore turnover Kaveri Medical Centre, its acquisition target will be an apt fit. The 225bed Kaveri Medical Centre currently caters largely to accident and emergency cases, but is unable to cater to the needs of corporate clients who demand special facilities. In addition, with the increase in the penetration of health insurance, the demand on hospitals is expected to rise.

Says Dr. Chandrakumar, "The hospital has an occupancy ratio of over 90 per cent and we have been turning away patients to other hospitals. Currently we are able to cater to the population living in the 50 kilometres radius. The acquisition would not only increase our bed capacity but also enable us to acquire new departments like oncology, mother and child care, diabetes care and others."

With software companies setting up their operations in Tiruchirapalli, he expects better business and cater to the population living in the 100 kilometres radius.

Seahorse Hospitals is part of the Mumbai headquartered shipping group, Seahorse, which owns 33.97 per cent of hospital company''s Rs12.5 crore equity. The public holding is 66.02 per cent and a mutual fund holds 0.01 per cent. It has a total land area of 49,000 sq.ft and a constructed area of around 1.98 lakh sq.ft and is located near the city bus stand and railway station.

For the past couple of years the fortunes of Seahorse Hospitals have been on a decline with its doctors and consultants starting their own hospitals and taking their patients along with them, which accounted fro the bed occupancy declining.

Last fiscal its turnover declined dramatically to of Rs1.97 crore, down from Rs 2.8 crore in FY 2006, and a loss of Rs1.2 crore.

The healthcare provider''s auditors'' statement for FY07 says the company has not provided for interest of Rs16 lakh on inter-company loans for the current year and Rs68.90 lakh for previous years.

Accordingly the loss for the current year is understated by Rs60.36 lakh, the accumulated losses and the liabilities are understated by Rs12.92 lakh. The hospital has around 100 employees.

In its reply Seahorse management had said that discussions are held with the concerned agencies for a negotiated rate of interest and hence no provision was made.

It is learnt the hospital has a total liability of around Rs7 crore. The other hitch for a suitor is that around 22,000 sq.ft of land occupied by Seahorse Hospital is under lease contract. While a new owner would like to own the entire property, given property prices in Tamil Nadu, the new buyer would have to factor this into account while quoting his price.

According to people close to Seahorse Hospitals, the promoter group is also negotiating with other potential buyers and would decide in favour of the highest bidder. However they expect a deal to be sealed in 15 days time.