Following SC order on forensic audit, IHH may raise Fortis stake to 51%

IHH says India remains a key strategic market as it plans to deepen its Fortis investment, despite a Supreme Court-ordered forensic audit into past transactions

Malaysian healthcare giant IHH Healthcare on Tuesday reiterated that it will proceed with plans to increase its stake in hospital chain Fortis Healthcare to 51 per cent over the next three to five years, taking its total capacity to around 10,000 beds by 2031.

 

“India remains a key strategic market for IHH, and we are committed to deepening our presence and increasing our investments in the country through Fortis,” the company said in an exchange filing.

 

This comes just days after the Supreme Court upheld a Delhi High Court order directing a forensic audit into the alleged erosion of assets by former Fortis promoters, brothers Malvinder and Shivinder Singh, during enforcement proceedings initiated by Japanese drugmaker Daiichi Sankyo.

 

 

The audit will extend beyond the brothers to banks and financial institutions involved in transactions affecting assets represented as available for satisfying the award. Fortis, its directors and officers, company secretary, compliance officer, registrar and transfer agent, depositories, and other intermediaries will also come under scrutiny.

 

“IHH will fully cooperate with the forensic audit and is confident that an independent review will objectively establish the above facts surrounding the transaction,” the company said in a public statement.

 

IHH currently owns a 31.17 per cent stake in Fortis, of which 31 per cent was acquired through its subsidiary Northern TK (NTK) Venture in November 2018 via a preferential allotment of newly issued Fortis shares worth ₹4,000 crore.

 

The transaction, however, came under legal scrutiny after Daiichi alleged that the Singh brothers had sold assets, pledged shares, including those in Fortis, and diverted funds in violation of a court-ordered arbitral award worth ₹2,562 crore.

 

IHH contended that the transaction had obtained all necessary corporate, shareholder, and regulatory approvals, including those required under the takeover regulations of the Competition Commission of India and the Securities and Exchange Board of India.

 

“No secondary shares were acquired from the former promoters and judgment debtors, Malvinder Mohan Singh and Shivinder Mohan Singh, and no payments were made to them,” the statement added.

 

IHH added that the Singh brothers had resigned from the Fortis board in March 2018, after which the company was overseen by a reconstituted three-member independent board appointed by activist minority investors.

 

The company said IHH was among several bidders invited to participate in the sale process. “IHH’s investment in Fortis took place in November 2018, many months after the Singh brothers had resigned from the Fortis board,” the statement said.

 

IHH said it was not a party to the dispute or execution proceedings between Daiichi and its judgment debtors.

 

“Despite not being involved in those proceedings, IHH suffered losses arising from delays in obtaining the mandatory tender offer approvals required for its acquisition of Fortis,” it added.

 

As a result, IHH and its subsidiary NTK sought damages of up to ₹10,930 crore from Daiichi, a claim that the Tokyo District Court dismissed in early September.

 

IHH alleged that Daiichi’s actions prevented NTK from proceeding with open offers to acquire additional shares in Fortis and Fortis Malar Hospitals.

 

The Malaysian company had to suspend its mandatory open offer for an additional 26 per cent stake in Fortis for seven years after Daiichi filed a contempt plea against the Singh brothers.