Fortis Extends Deadline For Submission Of Bids, Seeks To Recover Loans As Probe Finds Lapses
Fortis Healthcare Ltd. will extend the deadline for submission of binding bids after the release of audited financial results were delayed.
The deadline for the final bids from a shortlist of four suitors for the company will be extended and set for a date after the announcement of audited financial results, Fortis Chairman Ravi Rajagopal said in a conference call with analysts today. The bids were due on Thursday, June 28. The audited financial results will come “soon” and will not take weeks, Rajagopal added.
The troubled healthcare company reported its financial earnings earlier in the day after postponing it twice. Fortis reported a net loss of Rs 932 crore for the quarter ended March compared with a Rs 68-crore loss in the year-ago period, according to its exchange filings. That was largely due an exceptional loss of Rs 833.5 crore the company attributed to write off of goodwill, inter-corporate deposits and advances. The results have not been reviewed by Fortis’ auditor.
The results come just ahead of the deadline for submission of bids for the company’s hospital and diagnostics business after a four-month long sale process. Those vying for Fortis include the family offices of the Munjals and the Burmans, TPG-backed Manipal Health Private Enterprises Ltd., Malaysia’s IHH Healthcare Berhad and Radiant Life Care Pvt. Ltd.
Fortis is looking to get back on track with the help of fresh funds from new investors after promoters Malvinder Singh and Shivinder Singh lost control of the hospital company after lenders invoked pledged shares, and are being probed for siphoning funds from Fortis Healthcare and Religare Enterprises Ltd. to settle personal debt.
The company is taking action to secure its brands, Chief Executive Officer Bhavdeep Singh said on the call, adding that the Fortis brand is owned by a Singh brothers’ company. Fortis, which licenses its hospital brand, is in the third year of the nine-year brand licensing agreement.
“Fortis and SRL brands cost about Rs 3 crore a year in licence fees,” Singh added.
Fortis said it has initiated legal action to recover about Rs 500 crore of funds allegedly taken out of the company by the Singh brothers after an external investigation found “systemic lapses and override of controls” in the loan given. The loans were given to its founders without board approval and enough collaterals, Fortis said in a regulatory filing.
Fortis added that it has made provisions of Rs 580 crore in the March quarter against these loans whose “recoverability is doubtful”.
Under the founders, Fortis had loaned about Rs 500 crore to certain corporate bodies, which subsequently became part of the Singhs’ corporate group. These inter-corporate deposits “were not given under the normal treasury operations” and were not specifically authorised by the board of the company, as per the summary of the probe report disclosed in the regulatory filing.
For these ICDs, “the investigation report revealed that there were certain systemic lapses and override of controls, including shortcomings in executing documents and creating a security charge,” Fortis said. The charge was later on created in February 2018,” it added.
While the investigation report did not conclude on utilisation of funds by the borrower companies, there are findings in the report to suggest that ICDs were utilised by the borrowers for granting/ repayment of loans to certain additional entities, including those whose current and/ or past promoters/ directors are known to/connected with the promoters of Fortis.
The report of the independent investigation initiated by Fortis through an external legal firm in February this year, has been submitted to market regulator SEBI and Serious Fraud Investigation Office of the government.
Malvinder Singh’s Appointment Annulled
India’s second largest hospital chain also annulled the September 2016 appointment of former executive chairman Malvinder Singh as ‘Lead: Strategic Initiatives’ and will seek to recover payments made to him in that role as well as any company asset in his possession. Malvinder, who was appointed for a period of five years with effect from October 1, 2016, at a remuneration of Rs 12 crore per annum, had received Rs 6 crore during 2016-17 and a proportionate sum for 2017-18.
“The company is in the process of taking suitable legal measures to recover the payments made to him under the LoA (Letter of Appointment) as also to recover all company assets in his possession,” Fortis said.