The Hush Post: Fortis founders Shivinder and Malvinder Singh took at least Rs 500 crore ($78 million)out of the publicly-traded hospital company they control without board approval about a year ago, as per a report in international media Bloomberg News.
The funds were reported on the balance sheet of Fortis Healthcare Ltd as cash and cash equivalents, but the money was routed and placed under the control of the Singhs at the time, according to people in Fortis, Bloomberg said. Fortis’s auditor, Deloitte Haskins & Sells LLP, refused to sign off on the company’s second-quarter results until the funds were accounted for or returned, the people said, asking not to be identified.
Fortis announced on Thursday that Malvinder Singh is resigning from his executive chairman role and Shivinder Singh is stepping down as vice chairman. The brothers cited a court judgment relating to the sale of a drugmaker they previously controlled, saying their resignation would “free the organization from any encumbrances whatsoever that may be linked to the Promoters”, the Bloomberg report said. The Delhi High Court dismissed an appeal by the Singh brothers 10 days ago.
Interestingly, shares of Fortis Healthcare jumped 18% when the markets opened on Friday. Investors appeared more relieved at the exit of the controversial brothers than worried about their alleged financial wrongdoings, a leading Indian newspaper reported. Analysts attributed the sharp rise in the Fortis counter to the possible re-rating of the stock under a new owner. A combine of Manipal Hospitals and private equity giant TPG was seen close to a takeover deal.
But there are bankers, familiar with the developments, cautioning about turbulence ahead of the expected ownership change. There are conflicting views whether the exit of founders from the board would speed up a takeover deal or not, the newspaper said.
It wasn’t immediately clear what the Singhs may have used the funds for. They have been working to pay back the money so the company can release its results, the Bloomberg report said. Fortis has said that it would report both its second- and third-quarter results by February 13. The brothers own about 34 per cent of Fortis, according to exchange filings. The siblings faced a setback last month after a Delhi court ruled that $550 million awarded against them in Singapore is enforceable in India. A Singapore tribunal has said the Singhs must pay damages and interest to drugmaker Daiichi Sankyo concealing critical information during the sale of their generic drug firm, Ranbaxy Laboratories Ltd, to the Japanese company in 2008.