Sebi asks IHH Healthcare to get Delhi HC nod for Fortis open offer

India’s market regulator Securities and Exchange Board of India (Sebi) has asked Malaysia's IHH Healthcare Berhad to obtain an order from the Delhi High Court to allow the company to proceed with its proposed open offer for a 26.1 per cent stake in Fortis Healthcare, according to an exchange filing.

IHH indicated last week that it was ready to go ahead with the stalled open offer if the capital markets regulator allowed it.

"IHH wishes to announce that the Securities and Exchange Board of India has advised on 16th November 2022 that the open offers should be proceeded with after obtaining an appropriate order in this regard from the Delhi High Court,” the BSE notification read.

It added that: “In view of this letter from the Sebi, IHH is obtaining advice from legal counsel on the next steps."

Fortis chairman Ravi Rajagopal told Business Standard last week that they will put forward their arguments around why a forensic audit of the Fortis-RHT deal was not required in the Delhi High Court.

“The Supreme Court suggested to the Delhi High Court to consider a forensic audit of the Fortis-RHT deal. On our part, we would try to put up our arguments as to why we think a forensic audit is not required…. In the last few years, we have shown that the buyback transaction was very transparent. It had shareholder support. We had also submitted a complete RHT shareholding structure to the court…. We said that in our due diligence we did not find any evidence of the RHT shareholding being beneficial to anyone else other than what was in the list,” Rajagopal had said.

In 2018, soon after it acquired its stake, IHH infused Rs 4,000 crore into Fortis, and put Rs 3,400 crore into an escrow account for an open offer for another 26 per cent stake. The open offer has been stuck since 2018 on account of a legal battle involving another former group company.

IHH Healthcare had paid $1.1 billion to acquire its 31 per cent stake in a bidding process overseen by an independent board.

But the mandatory open offer was stayed by the Supreme Court after Japanese conglomerate Daiichi filed a plea against it over a separate controversy involving the drug company Ranbaxy.

Daiichi had challenged the Fortis-IHH deal to recover a Rs 3,600 crore arbitration award it had won in a Singapore tribunal against Fortis (and Ranbaxy’s) erstwhile promoters, the brothers Malvinder Singh and Shivinder Singh.

In September this year, the Supreme Court awarded six months jail term to Malvinder and Shivinder Singh in a case related to the sale of shares of Fortis to IHH Healthcare.