Metropolis' acquisition of Hitech Healthcare via Voluntary Liquidation - A Unique Way

In 2021, Metropolis Healthcare Limited (“MHL”) announced a proposed acquisition of 100% equity shares of Dr. Ganesan's Hitech Diagnostic Centre Private Limited and its subsidiary (‘Hitech’) for consideration in the form of cash of INR 511 crore plus MHL's equity shares worth circa INR 100 crore.

- Anirudha Jain

Though the proposed acquisition went through turbulence and at one time it appeared that the deal may not happen, MHL successfully closed the transaction in October 2021 with the entire cash consideration of INR 636 crore.

Later in February 2022, MHL announced that the Hitech has principally decided on a voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016 read with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 and the same was approved by its shareholders at its extra-ordinary general meeting held on 1st April 2022 (‘Voluntary liquidation commencement date”). Thereafter, the appointed liquidator of Hitech transferred the entire business undertaking of Hitech including its investment in its subsidiary on a going-concern basis to MHL, being a shareholder of Hitech.

The consolidation of Hitech business with MHL was achieved through voluntary liquidation and not as merger or demerger as normally followed for such transactions. Let us understand the nitty-gritties and broad reasons for choosing liquidation over a merger or demerger.

Accounting Treatment

Acquisition and Voluntary liquidation period

MHL recorded the unrelated acquisition transaction & other transactions as follows:

• Standalone balance sheet for FY 21-22 of MHL showed the investment in Hitech (under investment in subsidiaries and joint venture) as ₹63,142 lacs in non-current assets.

Consolidated balance sheet for FY 21-22 of MHL reflected Goodwill of ₹36,445 lacs. While in the Notes to account Goodwill amount is ₹28,181 lacs along-with values for Brand name as ₹29,387 lacs and non-compete fees as ₹3,229 lacs.