Year of reckoning for India Inc: Fortis Healthcare remains in the sick bay

Fortis Healthcare, now India's largest hospital chain, was set up in 2001 by Malvinder and Shivinder Singh, who had inherited the legacy of Ranbaxy and Religare from their father and grandfather. The hospital chain grew rapidly and even expanded overseas. Soon the crown jewel Ranbaxy was sold to Japan’s Daiichi in 2008 for $4.6 billion. In the court battles that followed the sale, the Singh brothers, who are now estranged, were directed in February 2018 to pay Daiichi Rs 35 billion for misleading the drugmaker by withholding information. By this time, newer entrants like Manipal and Apollo were also vying for pole position in the Indian healthcare market. Fortis profits had started declining since 2010-11 and it has been posting losses since 2014-15.

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To make things worse, allegations of money laundering to the tune of Rs 4.45 billion by the brothers began to surface, leading to investigations by the market regulator and the Serious Fraud Investigation Office. Allegations of financial irregularities were reported against the group’s financial services arm Religare. The promoters’ stake in Fortis continued to decline, slipping to less than 1 per cent. Fortis eventually declassified the Singh brothers as promoters in a bid to distance itself from the controversies and court battles. The hospital chain was looking for an investor — after several rounds of bidding, which saw Indian major Manipal Group along with PE partner TPG, China’s Fosun, and even the Sunil Munjal-Anand Burman combine bidding aggressively, Malaysia’s IHH won. Meanwhile, old timers from the board were removed following minority shareholder activism, and a Sebi forensic audit showed that the brothers had siphoned money.

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Finally, with the competition watchdog clearing the IHH deal, and the Malaysian major pumping Rs 40 billion into the beleaguered hospital chain in November to pick up a 31 per cent stake, a Supreme Court order in December threw a spanner in the works. Hearing a contempt plea by Daiichi, the court ordered status quo in the Fortis-IHH deal till further notice. So IHH has postponed its open offer — and the saga seems far from over.