Religare Enterprises Ltd. has asked the market regulator to remove Singh brothers as promoters after they stepped down from the board following allegations of siphoning off funds, a senior company executive told BloombergQuint requesting anonymity.
Malvinder Singh and Shivinder Singh have no association with the company nor any responsibilities for its management and governance, the company said in a statement on Feb. 17.
That came after a lawsuit by a New York-based investor in the Delhi High Court accusing them of diverting funds to repay personal debts, Bloomberg reported. The two are also accused of siphoning funds from Fortis Healthcare Ltd., India’s second largest hospital chain. They stepped down from the boards of both the companies.
The Supreme Court had also turned down their plea challenging the high court verdict that ruled the Rs 3,500-crore arbitral award that Daiichi Sankyo won at the Singapore tribunal was enforceable in India. It stems from information concealed while selling erstwhile Ranbaxy Laboratories Ltd. to the Japanese drugmaker.
Religare Enterprises’ board approved raising Rs 916.40 crore by issuing 17.55 crore warrants at Rs 52.20 each to a clutch of 41 investors led by Bay Capital Investments Ltd. That would increase Bay Capital’s stake, upon conversion, from 10-11 percent to 16 percent.
It’s still not a controlling shareholder and doesn’t have a right to a board seat as per the agreement, the executive quoted above said. The funds will be used to recapitalise its non-bank lending business, he said.
Investors brought in a new board, the official said. They are not the controlling shareholders and the company will be run professionally, he said.
The changes to the board were made at the initiative of the consortium of investors, the company said in a statement on Feb. 17. The investors included Bay Capital, International Finance Corporation and SSG Capital, the executive said.
The new board comprises nine members:
- Vikram Talwar, independent director
- P Vijaya Bhaskar, independent director
- Deepak Ramchand Sabnani, independent director
- Padam Bahl, independent director
- R. K. Shetty, independent director
- Sabina Vaisoha, independent director
- Ashok Mehta, whole-time director and interim chief executive officer
- Siddharth Mehta, non-independent, non-executive director
- Krishnan Subramanian, whole-time director
International Finance Corporation which held around 7.18 percent pre-issue has right to appoint its nominee on the board. It had withdrawn its nominee when the irregularities came to light.
Ashok Mehta and Siddharth Mehta’s appointments are subject to Reserve Bank of India’s approval.
The erstwhile management planned to sell the health insurance and broking businesses. There is no binding agreement with Edelweiss on the broking business and the completion of the insurance business sale to private equity firm True North depends on approval from the regulator, the official said.
Religare agreed to sell 80 percent in Religare Health Insurance Company Ltd. for nearly Rs 1,100 crore. Irrespective of the transaction going through, the company will infuse capital, the executive said.