Hospital chain Fortis Healthcare has sought government's approval to go ahead with a Rs1,000 crore rights issue, which would allow its existing foreign investors to subscribe to new shares and warrants, according to reports.

The move comes amidst unconfirmed reports that Fortis is likely to strike a deal for a 74 per cent equity stake in unlisted Wockhardt Hospitals for about Rs750 crore.

Pharmaceutical and biotechnology major Wockhardt, meanwhile refuted reports with regard to its financial figures and put at rest unfounded and earlier report which said Wockhardt's debt rose to 375 per cent of its equity.

Wockhardt, however, said it will undertake a corporate debt restructuring exercise, for which it has roped in ICICI Bank even as its promoter Habil Khorakiwala will quit the post of managing director, subject to shareholders' approval.

The company said it was looking at restructuring its certain businesses and subsidiaries, due to which it has delayed declaring the financial results of the fiscal year ended 31 December 2008.

''In view of the adverse market conditions, liquidity constraints and debt burden, the board decided to make a reference to corporate debt restructuring cell through ICICI Bank Ltd for financial restructuring of debts of the company through corporate debt restructuring mechanism," the company said in a filing with the Bombay Stock Exchange (BSE).

''As on 31 December 2008 (unpublished balance sheet), our likely net debt is around Rs3,400 crore, considering the Rs380 crore cash reserves with us. Our equity as per the unaudited consolidated financial results for the quarter ended 30 September 2008, represents Rs1,480 crore. Hence our debt equity ratio is 2.3 times and not 3.75 times as reported by the press,'' the company said in the filing.
 
While a deal with Fortis is also unconfirmed, the initial phase of acquisition of 40 per cent Wockhardt stock may cost may cost Fortis around Rs400 crore, which will be raised later, according to a report.

The report said a formal agreement is yet to be sealed and both companies are in the process of ironing out differences, which include the issue of branding the hospital chain, the report added.

In December 2008, the company's board had decided to come up with a rights issue of equity shares with warrants. There has been speculation that Fortis is in talks to acquire rival firm Wockhardt Hospital and the funds raised through the rights issue may be used to fund the acquisition. But, Fortis Healthcare management has repeatedly denied any talks with Wockhardt and has said that the funds would be used for organic growth plans and restructuring its balance sheet.

In the past, the Foreign Investment Promotion Board (FIPB) - the nodal government body that approves foreign investment into the country - had cleared certain proposals involving issue of warrants to foreign investors but has been silent on whether it indeed requires a prior approval. Due to lack of clarity, companies often seek FIPB approval before issuing warrants to foreign investors.