(Bloomberg) -- Two companies controlled by tycoons Malvinder and Shivinder Singh announced a reorganization as the brothers wrestle with debt and legal tangles.
The Singh brothers’ Religare Enterprises Ltd. announced a shakeup late Tuesday, with Malvinder stepping down as non-executive chairman of the financial services and small-business lender while four other officials also resigned. Separately, another Singh holding, Fortis Healthcare Ltd., offered to buy the assets of its Singapore-listed RHT Health Trust as part of a broader reorganization for Fortis, India’s second-largest private hospital chain by market value.
The upheaval comes as the Singhs have been attempting to sell assets in order to pay down debt at their main holding company RHC Holding Pvt., people familiar with the situation told Bloomberg in March. The Reserve Bank of India raised concerns over the creditworthiness of some customers of a Religare finance unit, according to a report by the company’s auditor PricewaterhouseCoopers LLP in June. Since August, India’s top court has ordered the Singhs not to sell or dilute their shareholding in Fortis.
“The brothers are trying to restructure their group and group companies including Fortis Healthcare to cool off investor concerns and settle issues,” said Arun Kejriwal, founder of Kejriwal Research & Investment Services Pvt. “This is a last-ditch effort to save the group by exiting from positions and consolidation.”
A Religare spokesman said the two announcements aren’t related, while a Fortis spokesman declined to comment. An RHC spokesman declined to comment on the restructuring at Religare and Fortis beyond the companies’ statements, as well as ongoing legal challenges, the company’s debt and debt rating.
Fortis is offering to buy RHT Health for an enterprise value of 46.5 billion rupees ($711 million). The transaction, which includes 11.52 billion rupees of debt, would lead to improved profitability with service fees being eliminated as the hospital company integrates all the assets into its fold, Fortis said in its statement.
In addition to Malvinder resigning at Religare, its chief executive officer and chief financial officer quit, as well as the company secretary and a board member. Religare said it appointed S. Lakshminarayanan as chairman, effective Nov. 14, and also named Krishnan Subramanian as new CFO. Malvinder will remain on the board.
Religare’s board approved plans to raise capital and said it will review strategic options including partnerships. The company also reported a narrower loss for the second quarter.
Shares of Religare soared 10 percent in Mumbai trading on Wednesday. The stock is down 82 percent for the year. Fortis shares jumped as much as 12 percent, trimming their year-to-date loss to 22 percent.
India’s top court in August ordered the Singhs to halt any dilution in their shareholdings of Fortis as it considers a petition by Japanese drug firm Daiichi Sankyo Co. to place a longer-term halt on asset sales by the brothers. Daiichi is seeking to enforce an award of about $500 million in damages and interest ordered by a tribunal in Singapore over the Singh brothers’ 2008 sale of their stake in Ranbaxy Laboratories Ltd. The Singhs are appealing that ruling.
The rating on main holding company RHC’s long-term non-convertible debt was downgraded to “default” by India Ratings & Research in July. The rating was assigned after RHC missed scheduled coupon payments on its non-convertible debentures the previous month and reflects the group’s impaired ability to service debt, according to the agency.
In September, the agency reported it changed RHC’s rating to that of a “non-cooperating category” after the company did not provide a no-default statement for the previous month despite multiple requests.
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