The statutory auditor to Fortis Healthcare Ltd. has raised three important issues pertaining to the company’s financial earnings for the quarter and nine months ended Dec. 31, 2017.
In the auditor review report, accompanying the earnings statements, Deloitte, Haskins & Sells LLP said that due to the significance of the matters relating to the ongoing investigations, to loans given and recoverability of certain vendor advances, “we have not been able to obtain sufficient appropriate evidence to form a conclusion on the Statement and hence we do not express a conclusion on the Statement”.
The Statement here refers to the company’s Statement Of Unaudited Financial Results
Fortis’ filing with the stock exchanges stated that the company’s Audit and Risk Management Committee has appointed an external legal firm to investigate -
- Inter-corporate deposits given by a wholly-owned subsidiary of the parent
- Intra-group and related party transactions
- Evaluation of implications of a recent legal notice
The company said it has also received communication from market regulator Securities and Exchange Board of India and the Registrar of Companies asking for information regarding certain inter-corporate deposits. SEBI has launched an investigation into the same, the company disclosed.
Pending completion of these investigations, Deloitte said it was unable to conclude on the impact on financial results.
In its response to the auditor’s comment, the management said the effect of the outcome of the investigations on the financial results will be dealt with when the investigations are over.
Fortis stated in the filing that its wholly owned subsidiary Fortis Hospitals Ltd. had on July 1, 2017 invested Rs 472.43 crore treasury funds with three companies. The inter-corporate deposits were for a period of 90 days and were defaulted on the due date of Sept. 29. Fortis Hospitals assigned the outstanding balances to another company on Sept. 30, and the money was to be received on March 31, 2018. But the assignment agreement was cancelled on Jan. 5, 2018 and the loan balance plus accrued interest of Rs 27.72 crore reverted to Fortis Hospitals. Meanwhile on Dec. 15, 2017 the three companies became part of the Fortis promoter group and the transactions recognised as related party transactions. So far Fortis Hospitals has received Rs 70 crore from one of the companies.
Commenting on these transactions, Deloitte said it was unable to conclude whether the grant of inter-corporate deposits was in compliance with the company’s internal policy, on the recoverability of these deposits and the possible effect on the financials of the company.
The management asserted in its statement that the deposits are secured and it “considers the outstanding amount as recoverable in due course”.
Unsecured Advances To Vendors
The auditor’s review report also drew attention to unsecured advances of Rs 57.76 crore from certain vendors where recoveries have been delayed.
“In the absence of any security and delays in recoveries, we are unable to conclude on the recoverability of the said advances,” said Deloitte.
Fortis has delayed the release of the July-September earnings and clubbed them with the financials for October-December quarter. After a late board meeting on Wednesday, that started at 10 p.m. and concluded at 11 p.m., Fortis filed financials for both quarters with the stock exchanges.