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Fortis Healthcare Ltd.

BSE: 532843 Sector: Health care
NSE: FORTIS ISIN Code: INE061F01013
BSE 00:00 | 22 Mar 136.45 0.15
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NSE 00:00 | 22 Mar 136.35 0.05
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OPEN 136.50
PREVIOUS CLOSE 136.30
VOLUME 17085
52-Week high 160.90
52-Week low 120.60
P/E
Mkt Cap.(Rs cr) 10,301
Buy Price 136.00
Buy Qty 25.00
Sell Price 137.20
Sell Qty 100.00
OPEN 136.50
CLOSE 136.30
VOLUME 17085
52-Week high 160.90
52-Week low 120.60
P/E
Mkt Cap.(Rs cr) 10,301
Buy Price 136.00
Buy Qty 25.00
Sell Price 137.20
Sell Qty 100.00

Fortis Healthcare Ltd. (FORTIS) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting here the Twenty SecondAnnual Report of your Company along with the Audited Standalone and Consolidated FinancialAccounts and the Auditors' Report thereon for the Year ended March 31 2018.

FINANCIAL RESULTS

The highlights of Consolidated Financial Results of your Company andits Subsidiaries are as follows:

(Rs in Lacs)

Particulars

Consolidated

Year ended March 31 2018 Year ended March 31 2017
Continuing Operations
1. Operating Income 456081 457371
2. Other Income 13973 16601
3. Total Income (1+2) 470054 473972
4. Total Expenditure (Excluding finance cost depreciation & tax expenses) 428769 422083
5. Operating Profit (EBITDA) (3-4) 41285 51889
6. Finance Charges Depreciation & Amortization 49675 45162
7. Loss before exceptional items and tax (5-6) (8390) 6727
8. Exceptional items (88103) (164)
9. Loss before tax (7+8) (96493) 6563
10. Tax Expenses 2265 7240
11. Net Profit for the year (9-10) (98758) (677)
12. Share in profits of associate companies 5316 48606
13. Profit/ (Loss) for the year from continuing operations (11+12) (93442) 47929
14. Discontinuing Operations
Profit/ (Loss) before tax from discontinuing operations - -
Tax expense of discontinuing operations - -
Profit/ (Loss) after tax and before minority interest from discontinuing operations
Share in profits/ (losses) of associate companies - -

(Rs in Lacs)

Particulars

Consolidated

Year ended March 31 2018 Year ended March 31 2017
Profit for the year from discontinuing operations (B) - -
15. Profit for the year (13+14) (93442) 47929
Profit for the year attributable to:
Owners of the Company (100921) 42167
Non-controlling interests 7479 5762
Profit for the year before other comprehensive income (93442) 47929
16. Other comprehensive income 367 (2734)
17. Total comprehensive income (15+16) (93075) 45195
Total comprehensive income for the year attributable to:
Owners of the Company (100541) 39457
Non-controlling interests 7466 5738

The highlights of financial results of your Company as a Standaloneentity are as follows:

(Rs in Lacs)

Particulars

Standalone

Year ended March 31 2018 Year ended March 31 2017
Continuing Operations
1. Operating Income 65948 64511
2. Other Income 13789 16920
3. Total Income (1+2) 79737 81431
4. Total Expenditure (Excluding finance cost depreciation & tax expenses) 69710 79164
5. Operating Profit (EBITDA) (3-4) 10027 2267
6. Finance Charges Depreciation & Amortization 9262 13298
7. Loss before exceptional items and tax (5-6) 765 (11031)
8. Exceptional items (6794) (373)
9. Loss before tax (7+8) (6029) (11404)
10. Tax Expenses 343 (3934)
11. Net Profit for the year (9-10) (6372) (7470)
12. Discontinuing Operations
Profit/ (Loss) before tax from discontinuing operations - -
Tax expense of discontinuing operations - -
Profit/ (Loss) after tax and before minority interest from discontinuing operations

(Rs in Lacs)

Particulars

Standalone

Year ended March 31 2018 Year ended March 31 2017
Share in profits/ (losses) of associate companies - -
Profit for the year from discontinuing operations (B) - -
13. Profit for the year (11+12) (6372) (7470)
14. Other comprehensive income 32 107
15. Total comprehensive income (13+14) (6340) (7363)

STATE OF COMPANY'S AFFAIR OPERATING RESULTS AND PROFITS

The Financial Performance of the business during FY 2017-18 wasimpacted by external headwinds related to the healthcare sector and internal challenges.Factors that impacted the performance include i) Regulatory changes with respect topricing on certain medical consumables ii) Management bandwidth constraints due todistraction arising from promoter related issues leading to change in controllinginterest iii) Prolonged transaction and due diligence process to augment capitalresources along with restructuring of ownership iv) Constraints in capex resulting indelay of certain significant business initiatives and v) Impact on the hospital businessspecifically in North India over a few months during the year arising from several highlypublicised patient related incidents in a few hospitals.

For the Financial Year 2017-18 the Company recorded a consolidatedrevenue from operations of Rs 4561 Crore compared to Rs 4574 Crore reported during theprevious year. Consolidated total income (including other income) from the operations forthe Financial Year 2017-18 was at Rs 4701 Crore compared to Rs 4 740 Crore in theprevious year. Operating Profit (EBITDA) for the year stood at Rs 413 Crore compared to Rs519 Crore in the previous year. The Net Profit after Tax for the Financial Year 2018 stoodat ' (1009) Crore as against Rs 422 Crore for the corresponding previous year. FY2018 PATafter Minority Interest and Share in Associates (PATMI) was primarily impacted by certainprovisions and impairment losses.

Your Company accords the highest priority to providing world-classquality and affordable healthcare services to all patients. During the year your Companycommenced several new medical programmes and specialities across various facilities whilststrengthening the existing medical offerings. Patient centricity and clinical excellencecontinue to drive your Company while it makes all efforts to bridge the expandingdemand-supply gap in the delivery of healthcare services in the country. Your Company alsohas a number of ambitious projects on the anvil aimed at spurring growth and development.

The healthcare verticals of the Company primarily comprise day carespecialty diagnostics and tertiary and quaternary care. As of March 31 2018

the Company had a network of 43 healthcare facilities (includingprojects under development in India and abroad with approximately 4800 operational beds.In India the Company is one of the largest private healthcare chains comprising a networkof 39 healthcare facilities including 31 operating facilities 3 satellite and heartcommand centres located in public and private hospitals and 5 healthcare facility projectswhich are under development or are greenfield land sites. In addition its Indiandiagnostics business has a presence in over 600 cities and towns with an establishedstrength of 368 laboratories including 197 self-operated laboratories (includes 23Wellness Centres which are in addition to Standalone Wellness Centres) 118 laboratoriesinside Hospitals including 27 labs located in Fortis facilities 42 Franchisee labs 7wellness centres and 4 international laboratories. It also has over 5539 Direct points1062 Collection Centers which includes 88 collection centers that are owned and 67collection centres at International locations. Your Company is driven by the vision ofbecoming a leader in the integrated healthcare delivery space and of serving the largerpurpose of saving and enriching lives through clinical excellence.

There has been no change in the nature of business of the Companyduring the year under review.

SIGNIFICANT MATTERS DURING THE YEAR UNDER REVIEW

The Board has from time to time during the year under review updatedits stakeholders about the key developments that took place by disseminating necessaryinformation to the stock exchanges and through various means of communications to theinvestors. Some of key activities are mentioned below:

> Investigation initiated by the erstwhile Audit and Risk ManagementCommittee- Basis the reports in the media and enquiries from inter alia the stockexchanges received by the Company about certain inter-corporate loans ("ICDs")given by a wholly owned subsidiary of the Company the erstwhile Audit and Risk ManagementCommittee of the Company in its meeting on February 13 2018 decided to carry out anindependent investigation through an external legal firm. The details as to the terms ofreference of the investigation are detailed in the Notes to Financial Statements formingpart of this Annual Report. Subsequent to the close

of the Financial Year the investigation report ("InvestigationReport") was submitted to the current Board on June 8 2018. The current Boarddiscussed and considered the Investigation Report and noted certain significant findingsof the external legal firm which are subject to the limitations on the informationavailable to the external legal firm and their qualifications and disclaimers as describedin their Investigation Report are also detailed in the Notes to Financial Statementsforming part of this Annual Report.

> Delay in submission of financial results for the Quarter endedSeptember 30 and December 31 2017 and Financial Year 2017-18- There have been many medianews released relating to the Company during the period February and March 2018 thenecessary intimations of which have been made to the stock exchanges from time to time.This had resulted in enhancing the scope of limited review audit by the statutory auditorsfor the quarters ended September 30 2017 and December 31 2017 which was consideredjust and equitable in the interest of governance and investors at large. In view of theabove situation the un-audited financial results for the quarter ended September 30 andDecember 31 2017 were submitted to the stock exchanges beyond the stipulated period asper SEBI Regulations. Also in view of the ongoing investigations coupled with promoterrelated issues the un-audited financial results for the quarter and Financial Year endedMarch 31 2018 were also submitted to the stock exchanges beyond the stipulated period.References to the above non-compliances have been explained in Corporate Governance Reportforming part of this Annual report.

> RHT Acquisition- The Board of Directors in their meeting held onNovember 14 2017 approved a significant restructuring initiative aimed at consolidatingthe entire India asset portfolio of RHT Health Trust ("RHT") into the Companyand its subsidiaries. The Company and the Trustee Manager of RHT signed a binding TermSheet on November 14 2017 and entered into an exclusivity arrangement for the acquisitionof all the securities of RHT's entities in India directly or indirectly holding theclinical establishments and businesses for an enterprise value of approximately Rupees465000 lacs ("the Proposed Transaction"). On February 12 2018 parties to theTerm Sheet entered into definitive agreement(s) with respect to the Proposed Transaction.The completion of the Proposed Transaction is subject to the satisfaction of conditionsprecedent enumerated in the definitive agreement(s) which includes regulatory approvals.The Company and RHT are in process of applying for regulatory approvals. Requisiteapproval of the shareholders of the Company have been obtained.

> Fortis and SRL Brand-The "Fortis" trademark was owned byRHC Holding Pvt Ltd. (RHCPL)- erstwhile ultimate holding company of Fortis HealthcareLimited ( FHL) and FHL used to pay the license fees to RHCPL for use of the trademark"Fortis" as per the various terms of the Brand License Agreement entered betweenFHL and RHCPL. RHCPL during the Financial Year 2017-18 assigned all the rights title andinterest in the "Fortis" trademark to RHC Healthcare Management Services PrivateLimited (RHMSL) and subsequent to that the license fees for use of the trademark"Fortis" has been accrued and paid by FHL to RHMSL till March 2018.

SRL Limited (SRL) entered into a Brand License Agreement with RHCHolding Private Limited (RHCPL) in November 2015 valid until May 2021 according to whichSRL paid a fee as per the various terms of the Brand License Agreement entered between SRLand RHCPL. RHCPL assigned all the rights title and interest in the "SRL"trademark to Headway Marketing Private Limited (HMPL) in December 2017 and intimated SRLin February 2018. SRL has accrued the fee payable to Headway Marketing Private Limited.

DIVIDEND AND TRANSFER TO RESERVES

Keeping in view the losses for the year under review the Board ofDirectors of your Company have not recommended any dividend for the Financial Year 201718.Accordingly there has been no transfer to general reserves.

The Company has formulated a Dividend Policy in terms of SEBI CircularNo. SEBI/LAD-NRO/6N/2016- 17/008 and the same is available on the website of the Companyat http://cdn.fortishealthcare .com/0.06032700-1507627501-Dividend-Distribution- Policy.pdf .

MATERIAL CHANGES

The following are the material changes and commitments affecting thefinancial position of the Company which have occurred between the end of the FinancialYear 2017-18 and the date of this report:

> Fund-raising proposal- The Board ofDirectors at its meeting onMarch 27 2018 approved a Composite Scheme of Arrangement with Manipal Health EnterprisesPrivate Limited. Owing to concerns raised by certain shareholders of the Company bindingbids were invited from interested parties viz IHH Healthcare Berhad Hero-BurmanConsortium Radiant and TPG-Manipal Consortium. The Board decided to appoint an ExpertAdvisory Committee (EAC) & an additional financial advisor to evaluate all bindingoffers. Subsequently in the Board Meeting held on May 10 2018 the Board by majorityapproved a preferential allotment of equity shares for Rupees 800 Crores and preferentialallotment of warrants for Rupees 1000 Crores to Hero-Burman Consortium. Consequent uponthis agreement the agreement with TPG-Manipal Consortium was terminated. Further on theMay 28 2018 the Board received a letter from Hero-Burman Consortium giving its consent toinitiate a fresh bidding process; consequently the Hero-Burman Consortium's offeraccepted by the Board on May 10 2018 was mutually terminated. The Board at its meetingheld on May 28-29 2018 decided to initiate a fresh time- bound process for receivingbids from interested parties. The details of the process were disclosed to the NationalStock Exchange of India Limited and BSE Limited. Pursuant to the above the Board ofDirectors of the Company received binding bids on July 3 2018 from IHH Healthcare Berhadand TPG-Manipal Consortium. The Board on July 13 2018 unanimously accepted the proposalof IHH Healthcare Berhad which included an infusion of Rs 4000 crore in the Companythrough additional equity capital and recommended for shareholder approval. The proceedsof the issue shall primarily be used for: (i) acquisitions contemplated under the masterpurchase agreement dated 12 February 2018 among inter alia the RHT Health TrustManager Pte. Ltd and the Company in relation to the proposed disposal of the entire assetportfolio of RHT Health Trust; (ii) providing exit to the private equity investors of SRLLimited; and (iii) other short term liquidity needs of the Company (i.e. to meet theCompany's working capital requirements capital expenditure for identifiedinfrastructure upgrades salary payments statutory dues immediate creditors othercorporate expenses and cost of raising funds and retiring high cost debt). The same iscurrently subject to the approval of the regulatory authorities. Upon approval oftransaction pursuant to acceptance of the binding bids there will be consequential changein the capital structure and board composition.

> Changed Board- The Company appointed Mr. Rohit Bhasin asAdditional Independent Director w.e.f. April 19 2018 (who thereafter resigned w.e.f. June26 2018). Also the Company received a requisition from National Westminster Bank Plc asTrustee of Jupiter India Fund (as represented by Jupiter Asset Management Limited) EastBridge Capital Master Fund Ltd. and East Bridge Capital Master Fund I Ltd. theshareholders of Company for induction of Ms. Suvalaxmi Chakraborty Mr. Ravi Rajagopaland Mr. Indrajit Banerjee as members of the Board and removal of Mr. Harpal Singh Ms.Sabina Vaisoha Dr. Brian William Tempest and Lt. Gen. Tejinder Singh Shergill from thedirectorship of the Company. Considering the profiles of the proposed board members theBoard at its meeting held on April 26 2018 decided to appoint the new board members onimmediate basis. Accordingly Ms. Suvalaxmi Chakraborty Mr. Ravi Rajagopal and Mr.Indrajit Banerjee were appointed as Additional Independent Directors w.e.f. April 272018. Subsequently Mr. Harpal Singh Ms. Sabina Vaisoha and Lt. Gen. Tejinder SinghShergill resigned from the directorship w.e.f. May 20 2018 and the shareholders at itsmeeting held on May 22 2018 regularized Ms. Suvalaxmi Chakraborty Mr. Ravi Rajagopaland Mr. Indrajit Banerjee as directors of the Company and removed Dr. Brian WilliamTempest from directorship. On June 1 2018 the board unanimously decided to appoint Mr.Ravi Rajagopal as Chairman of the Company.

> Withdrawal of the Scheme of Amalgamation and Demerger amongst SRLLimited and Fortis Malar Hospitals Limited- The Company had at its board meeting held onAugust 19 2016 approved the composite scheme of arrangement and amalgamation involving(a) transfer of the hospital business undertaking of Fortis Malar Hospitals Limited("FMHL") to the Company as a going concern by way of slump sale in lieu ofpayment of a lump sum consideration by the Company to FMHL ("Slump Sale") (b)transfer of the undertaking of the Company pertaining exclusively to the diagnosticsbusiness as identified in the Scheme to FMHL by way of a demerger in lieu of issuance ofequity shares by FMHL to shareholders of the Company as per approved share entitlementratio ("Demerger"); (c) the amalgamation of SRL Limited ("SRL") intoFMHL and dissolution of SRL without winding up and the consequent issue of equity sharesby FMHL to the shareholders of SRL and the cancellation of equity shares of SRL held byFMHL ("Amalgamation") and various other matters consequential or otherwiseintegrally connected therewith. The Company had obtained necessary approvals/ no objectionfrom BSE Limited National Stock Exchange of India Limited equity shareholders andunsecured creditors of the Company. Also the Board had through circulation on December14 2017 approved extension of the Long Stop Date of the Scheme from December 31 2017 toJune 30 2018. Considering that the entire process due to reasons beyond theCompany's control has been continuing for over 18 months without a completion itwas agreed to abort the Scheme. Accordingly the Company at its hearing on June 15 2018presented the matter before NCLT and the same was duly approved. The said Scheme has thusbeen terminated by the Company SRL and FMHL.

> Sale of certain units held in RHT Health Trust- In order to meeturgent cash requirement the Company had sold 18.2 million units of RHT Health Trust (anassociate of the Company) held through the wholly owned subsidiary Fortis HealthcareInternational Limited on May 30 2018 for a consideration of 13.65 million SingaporeDollars.

> Disinvestment of shareholding held in Lalitha Healthcare PrivateLimited (LHPL)- The Company has through its subsidiary- Fortis Cancer Care Limiteddivested its entire shareholding in LHPL (79.43% equity stake) on June 29 2018 due torecurring financial losses and infrastructure constraints.

> Re-classification of category of shareholders-

The Company is in process of seeking regulatory approvals forre-classification of Mr. Malvinder Mohan Singh Malvinder Mohan Singh- Trust Dr.Shivinder Mohan Singh Mr. Harpal Singh Mr. Abhishek Singh Fortis Healthcare HoldingsPrivate Limited Malav Holdings Private Limited and RHC Holding Private Limited from the"Promoter and Promoter Group" to the "Public" shareholding of theCompany and classification of Northern TK Venture Pte Ltd as "Promoter"subsequent to the completion of the preferential allotment of Equity Shares to Northern TKVenture Pte Ltd.

> Other key movements- The Board terminated the employment of Mr.Malvinder Mohan Singh as Lead- Strategic Initiatives w.e.f. June 26 2018. The details inthis regard have been duly incorporated in the notes to financial statement for FY2017-18. Updates w.r.t. ongoing regulatory investigations (viz. SEBI and SFIO) outcome ofthe Luthra and Luthra Investigation Report and other legal matters are also detailed inthe notes to financial statement for FY 2017-18.

STATEMENT IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITHREFERENCE TO THE FINANCIAL STATEMENTS

Statutory Auditors have in their report to the Board of Directors onthe Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3of Section 143 of the Companies Act 2013 ("the Act") made the following AdverseOpinion and are categorized as "Adverse Opinion". The directors response to thecomments of the auditors is given below :

Basis for Adverse Opinion

The matters described in the Basis for Qualified Opinion paragraphs andin paragraph 1 of the section ‘Report on Other Legal and RegulatoryRequirements' of our Audit Report on the Consolidated Ind AS Financial Statements forthe year ended March 31 2018 and the control weaknesses observed in the Company'sfinancial closing and reporting process in regard to assessment of the impairment ofgoodwill where the Company did not have adequate internal controls for identifyingimpairment indicators selection and application of various inputs to be used in testingreview and maintaining documentation for workings used in testing and concluding whetherthere is any impairment have resulted in material weaknesses in the internal financialcontrols over financial reporting as the Company and its subsidiaries have not (a) adheredto their internal control policies (b) safeguarded their assets (c) prevented and detectedpossible frauds and errors (d) ensured the accuracy and completeness of the accountingrecords and (e) prepared reliable financial information on a timely basis.

A ‘material weakness' is a deficiency or a combination ofdeficiencies in internal financial control over financial reporting such that there is areasonable possibility that a material misstatement of the company's annual orinterim financial statements will not be prevented or detected on a timely basis.

Adverse Opinion

In our opinion to the best of our information and according to theexplanations given to us and based on the consideration of the reports of the otherauditors referred to in the Other Matters paragraph below because of the effect/possibleeffect of the material weaknesses described in the Basis for Adverse Opinion paragraphabove on the achievement of the objectives of the control criteria the Company itssubsidiary companies its associate companies and a jointly controlled company which arecompanies incorporated in India have not maintained adequate internal financial controlsover financial reporting and the internal controls were also not operating effectively asof March 31 2018 based on the internal financial control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Control Over FinancialReporting issued by the Institute of Chartered Accountants of India.

We have considered the material weaknesses identified and reportedabove in determining the nature timing and extent of audit tests applied in our audit ofthe Consolidated Ind AS Financial Statements of the Company for the year ended March 312018 and these material weaknesses have inter alia affected our opinion on thesaid Consolidated Ind AS Financial Statements and we have issued a qualified opinion onthe said Consolidated Ind AS Financial Statements.

Director's response to comments of the statutory auditors in theAudit Report:

In relation to the deficiencies identified in impairment of goodwillthe Company will strengthen the appropriate internal controls for identifying impairmentindicators selection and application of various inputs to be used in testing review andmaintaining documentation for workings used in testing and concluding whether there is anyimpairment which could potentially result in material misstatement in the financialstatements arising from inaccurate carrying value of goodwill and impairment thereofreported in the financial statements. Further in order to strengthen the testing ofcontrol under ICFR a direction has been given to the management to develop a process ofquarterly testing plan to cover sample hospitals every quarter with the help of anexternal firm to ensure independence.

DETAILS OF SUBSIDIARY/JOINT VENTURES/ ASSOCIATE COMPANIES

During the year under review:

> The aggregate shareholding of Fortis Healthcare Holdings PrivateLimited (FHHPL) has been reduced to less than 51% and thereby FHHPL ceases to be theHolding Company of your Company (as per the definition given under Companies Act 2013);

> The Company acquired additional 15% stake in M/s. HiranandaniHealthcare Private Limited a subsidiary company from M/s. Fortis Healthcare HoldingsPrivate Limited a promoter company w.e.f. July 28 2017 at a consideration of Rs 61crore;

> M/s. Fortis Hospitals Limited acquired additional 51% stake inM/s. Fortis Emergency Services Limited its associate company from M/s. Fortis HealthcareHoldings Private Limited a promoter company w.e.f. July 28 2017 at a consideration of Rs25500. Consequently it became a wholly owned subsidiary;

> M/s. Escorts Heart Institute and Research Centre Limited acquiredadditional 70.61% stake in M/s. Fortis HealthStaff Limited its subsidiary company fromM/s. Fortis Healthcare Holdings Private Limited and M/s. RHC Holding Private Limitedpromoter companies w.e.f. July 28 2017 at an aggregate consideration of Rs 346000.Consequently it became

a wholly owned subsidiary. Subsequently EHIRCL advanced a loan toFortis Healthstaff Limited which was used to repay the outstanding unsecured loan amountof Rs 794.50 lacs to a promoter group company the details of which are disclosed underNotes to Financial Statements forming part of this Annual report ; and

> The Company sold its entire stake (49% in aggregate) in M/s.Fortis Medicare International Limited an associate company to M/s. Fortis GlobalHealthcare Private Limited a promoter company on August 30 2017 at 1 USD as part ofbusiness strategy and with a view of de-linkage from the promoters .

Further note that your Board of Directors have adopted a policy fordetermining "material subsidiary" pursuant to SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015. The said policy is available at http://cdn.fortishealthcare.com/Policy-on-material-subsidiary. pdf .

In terms of the said policy Fortis Hospitals Limited (FHsL) and SRLLimited (SRL) are considered as Material Subsidiary(ies). Necessary compliances w.r.t.material subsidiaries have been duly carried out except that the Company is yet to appointan Independent Director from the Board of Fortis Healthcare Limited on the Boards of FHsL.

PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIESASSOCIATES AND JOINT VENTURE COMPANIES

The consolidated financial statements of the Company and itssubsidiaries prepared in accordance with applicable accounting standards issued by theInstitute of Chartered Accountants of India forms part of the Annual Report. In terms ofthe Section 136 of the Companies Act 2013 financial statements of the subsidiarycompanies are not required to be sent to the members of the Company. The Company willprovide a copy of separate annual accounts in respect of each of its subsidiary to anyshareholder of the Company who asks for it and said annual accounts will also be kept openfor inspection at the registered office of the Company. Performance and financial positionof each of Subsidiaries Associates and Joint Ventures included in the ConsolidatedFinancial Statements of the Company is annexed herewith as Annexure-I in the prescribedformat (Form AOC-1).

LOANS/ADVANCES/INVESTMENTS/GUARANTEES

Particulars of Loans/Advances/Investments/guarantees given andoutstanding during the Financial Year 2017-18 are mentioned in Notes to FinancialStatements.

PUBLIC DEPOSITS

During the year under review your Company has not invited or acceptedany deposits from the public pursuant to the provisions of Section 73 of the CompaniesAct 2013 read with Companies (Acceptance of Deposit) Rules 2014 and therefore no amountof principal or interest was outstanding in respect of deposits from the Public as of thedate of Balance Sheet.

AUDITORS

Statutory Auditors

M/s. Deloitte Haskins & Sells LLP Chartered Accountants wereappointed as Statutory Auditors of your Company w.e.f. September 23 2015 for period of 5years subject to ratification by members at every Annual General Meeting.

Though the Ministry of Corporate Affairs has vide Companies AmendmentAct 2017 (effective May 7 2018) removed the requirement of placing the matter relatingto appointment of statutory auditors for ratification by members at every annual generalmeeting your Company as a matter of good governance and based on the recommendations ofthe Audit and Risk Management Committee proposes to ratify appointment of M/s DeloitteHaskins & Sells LLP Chartered Accountants as the Statutory Auditors of the Companyat the ensuing Annual General Meeting of the Company.

The existing Statutory Auditors have in their report to the Board ofDirectors on the Consolidated Financial Statements of the Company made the followingcomments which are self-explanatory and are categorized as "Matter of Emphasis"hence no comments in this regard have been offered by your Board of Directors.

a) Notes 14 (II) (A) and (B) relating to outcome of income taxassessments in respect of Escorts Heart Institute and Research Centre Limited (EHIRCL)one of the subsidiaries in the Group regarding amalgamation of two Societies and itssubsequent conversion to EHIRCL.

b) Notes 14 (II)(C) (D) and (E) relating to the outcome of thecivil suit / arbitrations with regard to termination of certain land leases allotted byDelhi Development Authority (DDA) and the matter related to non-compliance with the orderof the Hon'ble High Court of Delhi in relation to provision of free treatment / bedsto poor by Escorts Heart Institute and Research Centre Limited.

c) Note 14 (III) regarding matter relating to termination ofHospital lease agreement of Hiranandani Healthcare Private Limited one of thesubsidiaries in the Group by Navi Mumbai Municipal Corporation (‘NMMC') videorder dated January 18 2018.

Based on the advice given by external legal counsel no provision/adjustment has been considered necessary by the Management with respect to the abovematters in these Consolidated Ind AS Financial Statements.

The existing Statutory Auditors have in their report to the Board ofDirectors on the Consolidated Financial Statements of the Company made the followingqualification:

Basis for Qualified Opinion

1. As explained in Note 38 of the Consolidated Ind AS FinancialStatements pursuant to certain events/transactions the erstwhile Audit and RiskManagement Committee (the ‘ARMC') of the Company decided to carry out anindependent investigation by an external legal firm on certain matters more fullydescribed in the said Note. The terms of reference for the investigation the significantfindings of the external legal firm (including identification of certain systemic lapsesand override of internal controls) which are subject to the limitations on theinformation available to the external legal firm and their qualifications and disclaimersas described in their Investigation Report are summarised in the said Note.

Also as explained in the said Note:

a) As per the assessment of the Board based on the investigationcarried out through the external legal firm and the information available at this stageall identified/required adjustments/ disclosures arising from the findings in theInvestigation Report have been made in these Consolidated Ind AS Financial Statements.

b) With respect to the other matters identified in theInvestigation Report the Board intends to appoint an external agency of repute toundertake a scrutiny of the internal controls and compliance framework in order tostrengthen processes and build a robust governance framework. They will also assess theadditional requisite steps to be taken in relation to the significant matters identifiedin the Investigation Report including inter alia initiating an internal enquiry.

c) At this juncture the Board is unable to make a determination onwhether a fraud has occurred on the Company in respect of the matters covered in theinvestigation by the external legal firm considering the limitations on the informationavailable to the external legal firm and their qualifications and disclaimers as describedin their Investigation Report.

d) Various regulatory authorities are currently undertaking theirown investigation (refer Note 39 of the Consolidated Ind AS Financial Statements) and itis likely that they may make a determination on whether any fraud or any othernon-compliance/ illegalities have occurred in relation to the matters addressed in theInvestigation Report.

e) Any further adjustments/disclosures if required would be madein the books of account pursuant to the above actions to be taken by the Board /regulatory investigations as and when the outcome of the above is known.

In view of the above we are unable to comment on the regulatorynon-compliances if any and the adjustments / disclosures which may become necessary as aresult of further findings of the ongoing or future regulatory / internal investigationsand the consequential impact if any on these Consolidated Ind AS Financial Statements.

2. As explained in Notes 36 and 37 (b) of the Consolidated Ind ASFinancial Statements the Group has recognised a provision aggregating to Rupees 44502.62lacs against the outstanding ICDs placed (including interest accrued thereon of Rupees4259.62 lacs) and Rupees 2549.02 lacs against property advance (including interestaccrued thereon of Rupees 174.02 lacs) due to uncertainty of recovery of these balances.The recognition of interest income aggregating to Rupees 4433.64 lacs as at March 312018 on these doubtful ICDs and property advance is not in compliance with Ind AS 18‘Revenue' and consequently interest income and exceptional items (net) areoverstated to that extent.

3. As explained in Note 14 (I) of the Consolidated Ind AS FinancialStatements a Civil Suit has been filed by a third party (to whom the ICDs were assigned -refer Note 36 of the Consolidated Ind AS Financial Statements)(‘Assignee' or‘Claimant') against various entities including the Company (together "theDefendants") before the District Court Delhi and have inter alia claimedimplied ownership of brands "Fortis" "SRL" and "La-Femme"in addition to certain financial claims. In connection with this the District Courtpassed an ex-parte order directing that any transaction undertaken by defendants infavour of any other party affecting the interest of the Claimant shall be subject toorders passed in the said suit.

The Company has filed written statement denying all allegations madeagainst it and prayed for dismissal of the Civil Suit on various legal and factualgrounds. The Company has in its written statement also stated that it has not signed thealleged Term Sheet with the said certain party.

Whilst this matter was included as part of the investigation carriedout by the external legal firm referred to in paragraph 1 above the external legal firmdid not report on the merits of the case since the matter was sub judice.

In addition to the above the Company has also received four noticesfrom the Claimant claiming

(i) Rs 1800 lacs as per notices dated 30 May 2018 and 1 June 2018(ii) Rupees 21582 lacs as per notice dated 4 June 2018; and (iii) and Rupees 1962 lacsas per notice dated 4 June 2018. All these notices have been responded to by the Companydenying any liability whatsoever.

Separately the certain party has also asserted rights to invest in theCompany as part of the alleged transaction involving the Claimant. It has also allegedfailure on part of the Company to abide by the aforementioned Term Sheet and has claimedownership over the brands as well.

Since the Civil Suit is sub-judice the outcome of which is notdeterminable at this stage we are unable to comment on the consequential impact if anyof the above matters on these Consolidated Ind AS Financial Statements.

4. As explained in Note 9(4) of the Consolidated Ind AS FinancialStatements related party relationships as required under Ind AS 24 - Related PartyDisclosures and the Companies Act 2013 are as identified by the Management taking intoaccount the findings and limitations in the Investigation Report (Refer Notes 38 (d) (iv)(ix) and (x) of the Consolidated Ind AS Financial Statements) and the informationavailable with the Management. In this regard in the absence of specific declarationsfrom the erstwhile directors on their compliance with disclosures of related partiesespecially considering the substance of the relationship rather than the legal form therelated parties have been identified based on the declarations by the erstwhile directorsand the information available through the known shareholding pattern in the entities.Therefore there may be additional related parties whose relationship may not have beendisclosed to the Group and hence not known to the Management.

In the absence of all required information we are unable to comment onthe completeness/accuracy of the related party disclosures/details in these ConsolidatedInd AS Financial Statements and the compliance with the applicable regulations and theconsequential impact if any of the same on these Consolidated Ind AS FinancialStatements.

5. As explained in Note 37 (c) of the Consolidated Ind AS FinancialStatements the Company through its overseas subsidiaries made investments in an overseasfund. Subsequent to the year end investments held in the fund were sold at a discount of10%. As at March 31 2018 the consequential foreseeable loss of Rupees 5510.14 lacs(between the previously recorded carrying value of the investment and the amountsubsequently realised) has been considered in these Consolidated Ind AS FinancialStatements.

In absence of sufficient information available with the Groupdemonstrating the reasonability of the discount recorded as provision for foreseeable lossin the value of the investment in the overseas fund we are unable to comment on the same.

6. As explained in Note 43 of the Consolidated Ind AS FinancialStatements the Company having considered all necessary facts and taking into accountexternal legal advice has decided to treat as non est the Letter of Appointmentdated September 27 2016 as amended ("LoA") issued to the erstwhile ExecutiveChairman in relation to his role as ‘Lead: Strategic Initiatives' in theStrategy Function. The external legal counsel has also advised that the payments made tohim under this LOA would be considered to be covered under the limits of section 197 ofthe Companies Act 2013. The Company is in the process of taking suitable legal measuresto recover the payments made to him under the LoA as also to recover all theCompany's assets in his possession. The Company has sent a letter to the erstwhileExecutive Chairman seeking refund of the excess amounts paid to him.

In view of the above the amounts paid to him under the aforesaid LoAand certain additional amounts reimbursed in relation to expenses incurred (in excess ofthe amounts approved by the Central Government under section 197 of the Companies Act 2013for remuneration & other reimbursements) aggregating to Rupees 2002.39 lacs is shownas recoverable in the Consolidated Ind AS Financial Statements of the Company for the yearended March 31 2018. However considering the uncertainty involved on recoverability ofthe said amounts a provision of Rs 2002.39 lacs has been made which has been shown as anexceptional item.

As stated above due the nature of dispute and uncertainty involved weare unable to comment on the tenability of the refund claim the provision made for theuncertainty in recovery of the amounts the recovery of the assets in possession of theerstwhile Director and other non-compliances if any with the applicable regulations andthe consequential impact if any of the same on these Consolidated Ind AS FinancialStatements.

Qualified Opinion

In our opinion and to the best of our information and according to theexplanations given to us and based on the consideration of reports of the other auditorson separate financial statements of the subsidiaries associates and joint venturesreferred to in the Other Matters paragraphs below except for the effects / possibleeffects of the matters described in the Basis for Qualified Opinion paragraphs abovewhich are not quantifiable and our comments in paragraph 1 under the section ‘Reporton Other Legal and Regulatory Requirements' below the aforesaid Consolidated Ind ASFinancial Statements give the information required by the Act in the manner so requiredand give a true and fair view in conformity with the Ind AS and other accountingprinciples generally accepted in India of the Consolidated state of affairs of the Groupas at March 31 2018 and their Consolidated loss Consolidated total comprehensive losstheir Consolidated cash flows and Consolidated statement of changes in equity for the yearended on that date.

Director's response to comments of the statutory auditors in theAudit Report:

(a) With regard to the comments of the statutory auditors inparagraph 1 of the Basis for Qualified Opinion of Audit Report pertaining to theInvestigation Report it is submitted that based on the investigation carried out by theexternal legal firm and the information available at this stage all identified /required adjustments/ disclosures arising from the findings in the Investigation Reporthave been made. However the Board will be assessing additional requisite steps to betaken to address various matters identified in the report. Further various regulatoryauthorities are currently undertaking their own investigation. Any further adjustments/disclosures if required would be made in the books of account pursuant to the actionsto be taken by the Board and as and when the results of the various investigations areknown. For more details please refer to Note 38 of consolidated financial.

(b) With regard to the comments of the statutory auditors inparagraph 2 of the Basis for Qualified Opinion of Audit Report pertaining to therecognition of interest income please refer to Notes 28 and 36 of consolidated financial.

(c) With regard to the comments of the statutory auditors inparagraph 3 of the Basis for Qualified Opinion of Audit Report pertaining to certainclaims against the Company the Company has filed appropriate submissions in the courtdenying all allegations and praying for dismissal of the suit. For more details pleaserefer to Note 14 of consolidated financial.

(d) With regard to the comments of the statutory auditors inparagraph 4(a) of the Basis for Qualified Opinion of Audit Report pertaining to mattersrelating to grant of loans in the form of ICD's to three borrower companies this isa part of the investigation referred to in point no.1 above. Please refer to Notes 36 and38of consolidated financial for more details.

(e) With regard to the comments of the statutory auditors inparagraph 4(b) of the Basis for Qualified Opinion of Audit Report pertaining to theroll-over of ICDs this is a part of the investigation referred to in point no.1 above.Please refer to Notes 36 and 38of consolidated financialfor more details.

(f) With regard to the comments of the statutory auditors inparagraph 4(c) of the Basis for Qualified Opinion of Audit Report pertaining to theacquisition of equity interest in Fortis Healthstaff Limited this is a part of theinvestigation referred to in point no.1 above. Please refer to 38 for more details.

(g) With regard to the comments of the statutory auditors inparagraph 4(c) of the Basis for Qualified Opinion of Audit Report pertaining to mattersrelating to acquisition of equity interest in Fortis Emergency Services Limited pleaserefer to 38.

(h) With regard to the comments of the statutory auditors inparagraph 5 of the Basis for Qualified Opinion of Audit Report pertaining to relatedparty transactions please refer to Note 38.

(i) With regard to the comments of the statutory auditors inparagraph 6 of the Basis for Qualified Opinion of Audit Report pertaining to theforeseeable loss in the value in the overseas fund please note that the consequentialforeseeable loss of Rupees 5510.14 lacs has been recorded and considered in theconsolidated financial statements. For more details please refer to Note 37(c) ofconsolidated financial.

(j) With regard to the comments of the statutory auditors inparagraph 7 of the Basis for Qualified Opinion of Audit Report pertaining to the LoAissued to the erstwhile Executive Chairman please note that the Company havingconsidered all necessary facts has decided to treat as non est the LoA issued to theerstwhile Executive Chairman and is taking suitable legal measures to recover the paymentsmade to him under the LoA as well as all the Company's assets in this possession. Formore details please refer to Note 43 of consolidated financial.

The Statement on Impact of Audit Qualifications as stipulated inregulation 33(3)(d) is placed below:

Qualifications in the Auditor's Report

The re-constituted Board of Fortis Healthcare Limited wherein all theBoard members have been appointed subsequent to the year-end i.e. March 31 2018 havedealt with the matters stated in the qualifications in statutory auditor's report onthe Consolidated Financial Results of Fortis Healthcare Limited ("the Parent" or"the Company") and its subsidiaries (the Parent/Company and its subsidiariestogether referred to as "the Group") and its share of profit /(Loss) of itsjoint ventures and associates for the year ended March 31 2018 ("the ConsolidatedAnnual Results") included in the Statement of Consolidated Financial Results("the Consolidated Statement") to the extent information was available withthem.

(Rs in Lacs)

Sl. No. Particulars Audited Figures (as reported before adjusting for qualifications) Adjusted Figures (audited figures after adjusting for qualifications)# Adjusted Figures (audited figures after adjusting for qualifications)$
1 Turnover / Total income 470054 465620 Not Determinable
2 Total Expenditure 563496 559062 ---Do---
3 Net Profit/(Loss) (93442) (93442) ---Do---
4 Earnings Per Share (19.46) (19.46) ---Do---
5 Total Assets 862169 862169 ---Do---
6 Total Liabilities 330473 330473 ---Do---
7 Net Worth 531696 531696 ---Do---
8 Any other financial item(s) (as felt appropriate by the management) - - -

# for Qualification D.2 of the Auditor's Report.

$ for Qualifications D.1 D.3 to D.7 of the Auditor's Report.

Qualification D.1 of the Auditor's Report

1. Details of Audit Qualification: As explained in basis ofqualification-1 above

2. Type of Audit Qualification :

Qualified Opinion

3. Frequency of qualification:

First time

4. For Audit Qualification(s) where the impact is quantified by theauditor Management's Views:

Not Applicable

5. For Audit Qualification(s) where the impact is not quantified by theauditor:

(i) Management's estimation on the impact of audit qualification:

Not quantifiable.

(ii) If management is unable to estimate the impact reasons for thesame:

There were reports in the media and enquiries from inter aliathe stock exchanges received by the Company about certain inter-corporate loans("ICDs") given by Fortis Hospitals Ltd ("FHsL") a wholly ownedsubsidiary of Fortis Healthcare Ltd. The erstwhile Audit and Risk Management Committee ofthe Company in its meeting held on February 13 2018 decided to carry out an independentinvestigation through an external legal firm. Based on the investigation carried out bythe external legal firm and the information available at this stage all identified /required adjustments/ disclosures arising from the findings in the Investigation Reporthave been made. However the Board will be assessing additional requisite steps to betaken to address various matters identified in the report. Further various regulatoryauthorities are currently undertaking their own investigation. Any further adjustments/disclosures if required would be made in the books of account pursuant to the actionsto be taken by the Board and as and when the results of the various investigations areknown.

(iii) Auditors' Comments on (i) or (ii) above:

In view of the fact that the Board will be assessing additionalrequisite steps to be taken to address various matters identified in the report andvarious regulatory authorities are currently undertaking their own investigation we areunable to comment on the regulatory noncompliances if any and the adjustments/disclosures which may become necessary as a result of further findings of the ongoing orfuture regulatory / internal investigations and the consequential impact if any on theConsolidated Annual Results/the Consolidated Statement for the year ended March 31 2018.This has resulted in an audit qualification.

Qualification D.2 of the Auditor's Report

1. Details of Audit Qualification:

As explained in basis of qualification-2 above

2. Type of Audit Qualification :

Qualified Opinion

3. Frequency of qualification:

First time

4. For Audit Qualification(s) where the impact is quantified by theauditor Management's Views:

Fortis Hospitals Ltd ("FHsL") a wholly owned subsidiary ofFortis Hospitals Ltd has recognised interest income aggregating to Rupees 4434 lacs asat March 31 2018 on doubtful ICDs and property advance since they were due from therespective parties and for the purpose of including the same in the legal claim on theborrowers/entity. In view of the uncertainty in realisability the interest accrued hasbeen provided for in the Consolidated Annual Results/the Consolidated Statement.

5. For Audit Qualification(s) where the impact is not quantified by theauditor:

(i) Management's estimation on the impact of audit qualification:

Not Applicable

(ii) If management is unable to estimate the impact reasons for thesame:

Not Applicable

(iii) Auditors' Comments on (i) or (ii) above:

Not Applicable

Qualification D.3 of the Auditor's Report

1. Details of Audit Qualification:

As explained in basis of qualification-3 above

2. Type of Audit Qualification :

Qualified Opinion

3. Frequency of qualification:

First time

4. For Audit Qualification(s) where the impact is quantified by theauditor Management's Views:

Not Applicable

5. For Audit Qualification(s) where the impact is not quantified by theauditor:

(i) Management's estimation on the impact of audit qualification:

Not quantifiable.

(ii) If management is unable to estimate the impact reasons for thesame:

A third party (to whom the ICDs were assigned by a subsidiary FortisHospitals Limited (‘FHsL') ("Assignee" or "Claimant") hasfiled Civil Suit before the District Court Delhi in February 2018 against variousentities including the Company and have inter alia claimed implied ownership ofbrands "Fortis" "SRL" "La Femme" in addition to certainfinancial claims and for passing a decree that consequent to a Term Sheet dated December6 2017 with a certain party the Company is liable for claims owned by the Claimant tothe certain party.

The Company has filed written statement denying all allegations madeagainst it and prayed for dismissal of the Civil Suit on various legal and factualgrounds. The Company has in its written statement also stated that it has not signed thealleged binding Term Sheet with certain party.

In additions to the above the Company has also received four noticesfrom the Claimant claiming financial claims which has been duly responded to by theCompany denying any liability whatsoever.

Separately certain party has alleged rights to invest in the Company.It has also alleged failure on the part of the Company to abide by the aforementioned TermSheet and has claimed ownership over the brand as well.

Allegations made by the aforesaid party has been duly responded to bythe Company denying (i) execution of any binding agreement with the certain party and (ii)liability of any kind whatsoever. Company has also filed caveats before Hon'ble HighCourt of Delhi in this regard.

(iii) Auditors' Comments on (i) or (ii) above:

As explained in (ii) above since the matter is sub- judice theoutcome of which is not determinable at this stage we are unable to comment on theconsequential impact if any on the Consolidated Annual Results/ the ConsolidatedStatement for the year ended March 31 2018. This has resulted in an audit qualification.

Qualification D.4 of the Auditor's Report

1. Details of Audit Qualification:

As explained in basis of qualification-4 above

2. Type of Audit Qualification:

Qualified Opinion

3. Frequency of qualification:

First time

4. For Audit Qualification(s) where the impact is quantified by theauditor Management's Views:

Not Applicable

5. For Audit Qualification(s) where the impact is not quantified by theauditor:

(i) Management's estimation on the impact of audit qualification:

Not quantifiable

(ii) If management is unable to estimate the impact reasons for thesame:

a) With regard to Qualification 4 (a) and 4 (b):

Fortis Hospitals Ltd ("FHsL") a wholly owned subsidiary ofFortis Healthcare Ltd ("FHL") had placed

secured short-term investments in the nature of Inter CorporateDeposits (ICDs) with three companies (borrowers') aggregating to Rs 49414 lacs onJuly 1 2017 for a term of 90 days.

There were reports in the media and enquiries from inter aliathe stock exchanges received by the Company about certain intercorporate loans("ICDs") given by a wholly owned subsidiary of the Company. The erstwhile Auditand Risk Management Committee of the Company in its meeting on February 13 2018 decidedto carry out an independent investigation through an external legal firm.

Please refer to Notes 8 and 23 of Consolidated Statement for moredetails.

b) With regard to Qualification 4(c):

The Company through its subsidiary (i.e. Escort Heart InstituteandResearch Centre Limited ("EHIRCL")) acquired 71% (approx.) equity interest inFortis Healthstaff Limited. Subsequently EHIRCL advanced a loan to Fortis HealthstaffLimited which was used to repay the outstanding unsecured loan amount of Rs 794.50 lacsto a promoter group company. Please refer to 23 (d) (viii) of Consolidated Statement formore details.

The Company through its subsidiary (i.e. Fortis Hospitals Ltd("FHsL")) has acquired equity interest in Fortis Emergency Services Limited froma promoter group company. On the day of share purchase transaction FHsL advanced a loanto Fortis Emergency Services Limited which was used to repay an outstanding unsecured loanamount to the said promoter group company. Please refer to 23 (e) of ConsolidatedStatement for more details.

(iii) Auditors' Comments on (i) or (ii) above:

As explained in (ii) above with respect to:

a) Granting of loans in the form of ICDs to three borrowercompanies - we are unable to comment whether aforesaid loans and advances made by thesubsidiary on the basis of security have been properly secured or whether they areprejudicial to the interests of the Group. The Group has recognised a provisionaggregating to Rupees 44503 lacs against outstanding ICDs placed (including interestaccrued thereon of Rupees 4260 lacs).

b) Roll-over mechanism devised for granting of ICDs to threeborrower companies - we are unable to determine whether these transactions in substancerepresent book entries or whether they are prejudicial to the interests of the Group asthese were simultaneously debited and credited to the bank statement.

c) Acquisition of equity interests in and advancing of loan toFortis Healthstaff Limited and Fortis Emergency Services Limited - we are unable todetermine whether these transactions are prejudicial to the interests of the Group.

The above matters have resulted in audit qualifications.

Qualification D.5 of the Auditor's Report

1. Details of Audit Qualification:

As explained in basis of qualification-5 above

2. Type of Audit Qualification:

Qualified Opinion

3. Frequency of qualification:

First time

4. For Audit Qualification(s) where the impact is quantified by theauditor Management's Views:

Not Applicable

5. For Audit Qualification(s) where the impact is not quantified by theauditor:

(i) Management's estimation on the impact of audit qualification:

Not quantifiable

(ii) If management is unable to estimate the impact reasons for thesame:

The related party relationship as required under Ind AS 24 - RelatedParty Disclosures and the Companies Act 2013 are as identified by the Management takinginto account the findings and limitations in the Investigation Report and the informationavailable with the Management. In the absence of specific declarations from the erstwhileDirectors on their compliance with disclosures of related parties especially consideringthe substance of the relationship rather than the legal form the related parties havebeen identified based on the declarations by the erstwhile Directors and the informationavailable through the known shareholding pattern in the entities. Therefore there may beadditional related parties whose relationship may not have been disclosed to the Companyand not known to the Management.

(iii) Auditors' Comments on (i) or (ii) above:

As explained in (ii) above in the absence of all required informationwe are unable to comment on the completeness/ accuracy of the related party relationshipsas required under Ind AS 24 - Related Party Disclosures the Companies Act 2013 SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 (as amended) and thecompliance with the other applicable regulations and

the consequential impact if any of the same on Consolidated AnnualResults/ the Consolidated Statement for the year ended March 31 2018. This has resultedin an audit qualification.

Qualification D.6 of the Auditor's Report

1. Details of Audit Qualification:

As explained in basis of qualification-6 above

2. Type of Audit Qualification :

Qualified Opinion

3. Frequency of qualification:

First time

4. For Audit Qualification(s) where the impact is quantified by theauditor Management's Views:

Not Applicable

5. For Audit Qualification(s) where the impact is not quantified by theauditor:

(i) Management's estimation on the impact of audit qualification:

Not quantifiable

(ii) If management is unable to estimate the impact reasons for thesame:

The Company through its overseas subsidiaries [i.e. Fortis AsiaHealthcare Pte Ltd Singapore and Fortis Global Healthcare (Mauritius) Limited] madeinvestments in Global Dynamic Opportunity Fund an overseas funds. Subsequent to the yearend investments held in Global Dynamic Opportunity Fund were sold at a discount of 10%.As at March 31 2018 the carrying value of the investment in the overseas fund has beenrecorded at the net recoverable value based on subsequent realisation. The consequentialforeseeable loss of Rupees 5510 lacs (the difference between the previously recordedcarrying value of the investment and the amount subsequently realised) has been consideredin the Consolidated Annual Results.

The investigation report of external legal firm (appointed by theerstwhile Audit and Risk Management Committee of the Company) noted that there weresignificant fluctuations in the NAV of the investments in overseas funds by the overseassubsidiaries during a short span of time. Further in the internal correspondence withinthe Company the investment in the overseas funds have been referred to as related partytransactions.

(iii) Auditors' Comments on (i) or (ii) above:

As explained in (ii) above in absence of sufficient informationavailable with the Group demonstrating the reasonability of the discount recorded asprovision for foreseeable loss in the value of the investment in the overseas fund we areunable to comment on the same. This has resulted in an audit qualification.

Qualification D.7 of the Auditor's Report

1. Details of Audit Qualification:

As explained in basis of qualification-7 above

2. Type of Audit Qualification :

Qualified Opinion

3. Frequency of qualification:

First time

4. For Audit Qualification(s) where the impact is quantified by theauditor Management's Views:

Not Applicable

5. For Audit Qualification(s) where the impact is not quantified by theauditor:

(i) Management's estimation on the impact of audit qualification:

Not quantifiable.

(ii) If management is unable to estimate the impact reasons for thesame:

The Company having considered all necessary facts and taking intoaccount legal advice has decided to treat as non-Est the Letter of Appointmentdated September 27 2016 as amended ("LoA") issued to the erstwhile ExecutiveChairman of the Company in relation to his role as ‘Lead: Strategic Initiatives'in the Strategy Function. Basis legal advice taken by the Company the payments made tohim under this LoA would be considered to be covered under the limits of section 197 ofthe Companies Act 2013. The Company is in the process of taking suitable legal measuresto recover the payments made to him under the LoA as also to recover all theCompany's assets in his possession. The Company has sent a letter to the erstwhileExecutive Chairman seeking refund of the excess amounts paid to him.

In view of this the amount paid to him under the aforesaid LOA andcertain additional amount reimbursed in relation to expenses incurred (in excess of theamounts approved by the Central Government under section 197 of the Companies Act 2013for remuneration & other reimbursements) aggregating to Rupees 2002 lacs is shown asrecoverable in the Consolidated Annual Results for the year ended March 31 2018. Howeverconsidering the uncertainty involved on recoverability of the said amounts a provision ofRupees 2002 lacs has been made.

(iii) Auditors' Comments on (i) or (ii) above:

As explained in (ii) above due the nature of dispute and uncertaintyinvolved we are unable to comment on the tenability of the refund claim the provisionmade for the uncertainty in recovery of the amounts the recovery of the assets inpossession of the erstwhile Director and other noncompliances if any with the applicableregulations and the consequential impact if any of the same on Consolidated AnnualResults/the Consolidated Statement for the year ended March 31 2018. This has resulted inan audit qualification.

• Cost Auditors

Pursuant to Section 148 of the Companies Act 2013 read with TheCompanies (Cost Records and Audit) Rules 2014 the cost audit records maintained by theCompany in respect of its hospital activity is required to be audited. Your Directors hadon the recommendation of the Audit and Risk Management Committee appointed M/s. JitenderNavneet & Co. Cost Accountants to audit the cost accounts of the Company for theFinancial Year 2017-18 at a remuneration of Rs 3 lac (plus out of pocket expenses andtaxes). As required under the Companies Act 2013 the remuneration payable to the costauditors is required to be placed before the Members in a general meeting forratification. Accordingly a resolution seeking Member's ratification for theremuneration payable to M/s Jitender Navneet & Co. Cost Auditors is included in theNotice convening the Annual General Meeting. Further in terms of Companies (Accounts)Rules 2014 it is confirmed that maintenance of cost records as specified by the CentralGovernment under sub-section (1) of Section 148 of the Companies Act 2013 is applicableon your Company and accordingly such accounts and records are properly made and maintained.

• Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act 2013and The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theCompany has appointed M/s. Sanjay Grover & Associates Practicing Company Secretaryto undertake the Secretarial Audit of the Company. The Company has complied with theprovisions of Secretarial Standards to the extent feasible. The Report of the SecretarialAudit Report is annexed herewith as "Annexure II". The adverse remarks andmanagement response to the same is as given below:

S. No. Remarks by auditors Management Response
1 The financial results for the quarter(s) ended on September 30 2017 December 31 2017 and March 31 2018 were not submitted with Stock Exchange(s) within the specified period as required under Regulation 33 of SEBI LODR Due to non-completion of audit coupled with ongoing investigations the financial results for the quarter(s) ended on September 30 2017 December 31 2017 and March 31 2018 were submitted after the stipulated timelines.
2 Reports on transfer of physical shares for the half year(s) ended on September 30 2017 and March 31 2018 were placed before the Board of Directors of the Company but not reviewed as required under Regulation 40 of SEBI LODR within the stipulated time period Due to paucity of time the reports on transfer of physical shares for the half year(s) ended on September 30 2017 and March 31 2018 were not discussed at the scheduled board meetings. The same were duly noted in subsequent board meetings.
3 Reports on corporate governance for the quarter(s) ended on September 30 2017 December 31 2017 and March 31 2018 were placed before the Board of Directors of the Company but not reviewed as required under Regulation 27 of SEBI LODR within the stipulated time period Due to paucity of time the reports on corporate governance for the quarter(s) ended on September 30 2017 December 31 2017 and March 31 2018 were not discussed at the scheduled board meetings. The same were duly noted in subsequent board meetings.
4 Compliance reports pertaining to all laws applicable to the Company prepared by the Company as well as steps taken by the Company to rectify instances of non-compliances for the quarter(s) ended on September 30 2017 December 31 2017 and March 31 2018 were not reviewed by the Board of Directors of the Company periodically Due to paucity of time the compliance reports were not discussed at the scheduled board meetings. The same were duly noted in subsequent board meetings.

 

S. No. Remarks by auditors Management Response
5 Statements detailing the number of investor complaints for the quarter(s) ended on September 30 2017 December 31 2017 and March 31 2018 were placed before the Board of Directors of the Company but not reviewed as required under Regulation 13 of SEBI LODR within the stipulated time period Due to paucity of time the Statements detailing the number of investor complaints for the quarter(s) ended on September 30 2017 December 31 2017 and March 31 2018 were not discussed at the scheduled board meetings. The same were duly noted in subsequent board meetings.
6 There was gap of more than one hundred and twenty days between the two meetings of the Audit Committee held on August 03 2017 and February 13 2018 which is not in compliance with the requirements of Regulation 18 of SEBI LODR The Audit and Risk Management Committee was not held during the quarter ended December 31 2017 due to nonfinalisation of audit and the financial results for the quarter ended September 30 2017. The agenda and complete notes for the same were duly circulated.
7 As on March 31 2018 the Nomination and Remuneration Committee does not comprise of at least three members as per the requirements of Section 178 of the Act and Regulation 19 of SEBI LODR The Nomination and Remuneration as on February 13 2018 was re-constituted by the Board to include Lt. Gen. Tejinder Singh Shergill (Chairperson); Ms. Joji Sekhon Gill; Dr. Brian William Tempest; and Dr. Preetinder Singh Joshi. Post the resignations tendered by Ms. Joji Sekhon Gill and Dr. Preetinder Singh Joshi in March 2018 the board as on March 31 2018 was very unstable due to frequent changes in its composition. The Board re-constituted the Committee on April 5 2018 to include Lt. Gen. Tejinder Singh Shergill (Chairperson); Dr. Brian William Tempest; and Mr. Harpal Singh as the Committee members.
8 The Board of Directors has not made performance evaluation of the Board as a whole its Committees and Individual Directors as per the requirements of Section 134(3)(p) of the Act read with Regulation as per the requirements of Regulation 17(10) of SEBI LODR The process of board evaluation of the Company was kicked off in February 2018 and thereafter the self-evaluation forms were obtained from the directors as available and the process-co-ordinators carried out the one-on-one discussion. However due to the complete re-constitution of the board no evaluation of the performance by the Board Nomination and Remuneration Committee or Independent Directors was carried out and thereby no report on the same was placed for FY 2017-18. For the same reason no meeting of Independent Directors was held during the year.
9 Separate meeting of Independent Directors' was not held during the financial year as per the requirements of Regulation 25 of SEBI LODR and Schedule IV to the Act
10 The remuneration of Rs 200239000/- paid to the erstwhile Executive Chairman in relation to his role as ‘Lead: Strategic Initiatives' in the Strategy Function was in excess of the limits approved by the Central Government as under Section 197 of the Act The Company had sought legal advice on the payments made to Mr. Malvinder Mohan Singh Executive Chairman in his capacity as Lead- Strategic Initiatives and basis the same it was suggested that any payment made to him in any capacity would be considered to be covered under the limits of section 197 of the Companies Act 2013. The Company is in the process of taking suitable legal measures to recover the payments made to him
11 The Company was having layers of subsidiaries as of March 31 2018 for which it was required to file Form CRL-1 The Company had 3 layers of subsidiaries as of March 31 2018 and is process of filing Form CRL-1 in terms of the requirements of Companies Act 2013 ("Act"). However the 3rd layer of subsidiary has been divested during the current year and thereby the Company is in compliance of applicable provisions of the Act as on the date of the report.

• Internal Auditors

Upon the recommendation of the Audit and Risk Management Committee theBoard of Directors has appointed Mr. Rajiv Puri Head Risk and Internal Audit as the ChiefInternal Auditor of the Company and authorized him to engage independent firms forconducting the internal audit for the Financial Year 2017-18. Accordingly M/s. KPMG &Genpact Enterprise Risk Consulting LLP were engaged to perform Internal Audit for theCompany/its subsidiaries.

Besides the details of frauds as mentioned in the Auditors Report ifany as per the requirement of Companies Auditor Report Order (CARO) Rules 2016 therewas no fraud reported by the above stated auditors during the year under review.

SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS

During FY 17-18 there was no significant material order passed by theRegulators/ Courts which would impact the going concern status of the Company and itsfuture operations. Updates w.r.t. ongoing regulatory investigations (viz. SEBI and SFIO)and other legal matters are detailed in the notes to financial statement for FY 2017-18.

CAPITAL STRUCTURE/STOCK OPTION

The Company currently manages its stock options through "EmployeeStock Option Plan 2007" and "Employee Stock Option Plan 2011"("Schemes") as approved by the shareholders. The Nomination and RemunerationCommittee of the Board of Directors of the Company inter alia administers andmonitors the Schemes of the Company. Each option when exercised would be converted intoone fully paid up equity share of Rs 10 each of the Company. During the year under review2500000 options were granted by the Company. Disclosure pursuant to the Securities andExchange Board of India (Share Based Employee Benefits) Regulations 2014 for the Yearended March 31 2018 is available at http://cdn .fortishealthcare.com/ESOPdisclosure2017-18.pdf and forms part of this Directors'Report.

During the year under review under the terms of the "EmployeeStock Option Plan 2007" 22600 stock options were exercised and under the terms of"Employee Stock Option Scheme 2011" 907000 stock options were exercised.

The certificate from the Statutory Auditors ofthe Company stating thatthe Schemes have been implemented in accordance with the SEBI Guidelines would be placedat the Annual General Meeting for inspection by members.

The Company has not made any provision of money for purchase of orsubscription for its own shares or of its holding Company.

Details pertaining to shares in suspense account are specified in thereport of Corporate Governance forming part of the Board Report.

Extract of Annual Return is annexed herewith as Annexure III.

ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The particulars required under Section 134(3)(m) of the Companies Act2013 read with Rule 8(3) of "The Companies (Accounts) Rules 2014" regardingConservation of Energy and Technology Absorption is given in Annexure IV forming part ofthe Board Report. Further details pertaining to Foreign Exchange Earnings and Outgo is asgiven below:

Total Foreign Exchange Earned and Used (Based on Standalone FinancialStatements)

Particulars Amount (in Rs Crore)
Foreign Exchange earned in terms of Actual Inflows 15.80
Foreign Exchange outgo in terms of Actual Outflows 17.48

Note: Earning and expenditure in foreign currency is on accrual basis.

CORPORATE SOCIAL RESPONSIBILITY - OUR JOURNEY THROUGH THE PAST YEAR

As a responsible corporate citizen and a member of the Indianhealthcare ecosystem we at Fortis Healthcare strongly believe that we can meaningfullyalleviate the problem of inequitable access to quality healthcare. By creating andsupporting social sector programmes linked to health and well-being we seek to leverageour skills experience capabilities technologies and facilities to address a criticalsocial need for the vulnerable sections of society. We have continuously enabledprogrammes and initiatives based on rigorous needs assessment leading to not justimprovement in healthcare service delivery but also creating social awareness and change.We believe this is the best way to have the greatest impact because our interventions arecapable of transforming lives building aware communities and protecting the environment.

The CSR initiatives for Fortis Healthcare Limited are led throughFortis Charitable Foundation its designated CSR vehicle. The work of the Foundation issupported and executed by two entities: The Fortis Charitable Foundation (FCF)- a Trustset up in 2005 and The Fortis Foundation (FF)- a Section 8 Company set up in 2013.

These entities work in a collaborative and inclusive manner not only toalign and synergise the social enterprise work of the group companies but also to expandtheir circle of partnerships with Government Non-Government Organisations (NGOs) othercorporates and individuals.

Working through a dedicated team of employees and volunteers theirwork focuses on three programmes that work towards:

• The health and well-being of the Mother and Child (AANCHAL)

• The provision of timely medical support in the event of adisaster and enabling Charitable Medical Infrastructure (SEWA)

• Creating and supporting open platforms for HealthcareInformation (SAVERA)

Fortis Healthcare Limited has chosen to support the SEWA and SAVERAprogram. In the coming years the Company intends to include other Special Purpose Vehicles(including Fortis CSR Foundation) for sustainability and scalability of the project tocarry out CSR activities.

ABOUT SAVERA PROGRAM

SAVERA focuses on developing collating and providing access tohealthcare information. It leverages different channels of communication - children'sbooks audiovisuals posters and social media to create awareness on nutrition healthand hygiene.

SAVERA seeks to provide a platform to initiate and share research tocreate awareness on critical health issues and work towards driving opinion & publicpolicy around viable options.

SAVERA has created a credible knowledge repository of disease relatedinformation under an open platform for sharing.

SAVERA focuses on:

• Anti-Tobacco Campaign

• First Aid & Basic Life Support Training

• E-communication portal for Health Information -www.gyankaari.com

ANTI- TOBACCO CAMPAIGN

As part of the anti-tobacco campaign Fortis Foundation hascollaborated with Sambandh Health Foundation to increase awareness about COTPA (Cigarettesand Other Tobacco Products Act).

Over 33700 challans were issued and over 9500 police and educationofficials were sensitized about COTPA and its enforcement.

FIRST AID/BLS TRAINING

As part of this Fortis Foundation has collaborated with Save LifeFoundation to provide Basic Trauma Life Support (BTLS) training to police personnel inDelhi/NCR as they are the first responder in emergency situations. Have trained over 110police personnel. The volunteers are now trained to save lives in case of an emergency.

GYANKAARI

The Bi-lingual Health Information portal - www. gyankaari.com waslaunched in December 2017. The open platform contains doctor-verified information aboutdiseases causes symptoms prevention myths and possible treatment options.

HEALTH INFORMATION PUBLICATIONS

Over the past year awareness has been created on health hygiene andnutrition by distributing over 351500 illustrative books and pamphlets on preventive andremedial health information. The information has been distributed across 25 Non-GovernmentOrganisations and 31 hospitals pan India.

ABOUT DISASTER INITIATIVE OF SEWA PROGRAM

India has been historically vulnerable to disasters with floodscyclones earthquakes and landslides being a recurrent phenomenon. In the event of adisaster thousands of lives are affected and livelihoods worth millions are destroyed.The urgent need in such situations is access to medical care.

SEWA is a Disaster Relief Initiative that aims to provide emergencymedical relief services in an organised and time sensitive manner to people affected bydisasters. SEWA's core commitment is to support the government's efforts inproviding medical relief during a calamity.

Fortis Healthcare Ltd. in FY 17-18 structured its volunteer base toprovide medical relief services in times of disaster situations.

Particulars pursuant to Clause O of Sub-Section 3 of Section 134 of TheCompanies Act 2013 read with Rule 9 of Companies (Corporate Social Responsibility) Rules2014 is given in "Annexure V".

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company as on date comprises of threenon-executive independent directors. Pursuant to Sections 149 and 152 of the CompaniesAct 2013 no director is liable to retire by rotation at the ensuing Annual GeneralMeeting.

Further the following changes took place in the directorship duringthe Financial Year 2017-18 and till the date of this report:

a) Ms. Lynette Joy Hepburn Brown resigned from the position ofnon-executive independent director w.e.f. April 11 2017 due to personal reasons;

b) Mr. Ravi Umesh Mehrotra resigned from the position ofnon-executive director w.e.f. April 12 2017due to personal reasons;

c) Mr. Sunil Naraindas Godhwani vacated his office from theposition of non-executive director w.e.f. August 4 2017 in terms of the provisions ofSection 167 of Companies Act 2013;

d) Ms. Shradha Suri Marwah resigned from the position ofnon-executive independent director of the Company w.e.f. November 14 2017due to personalreasons;

e) On February 8 2018 Mr. Malvinder Mohan Singh ExecutiveChairman and Dr. Shivinder Mohan Singh Non-Executive Vice Chairman tendered theirresignation from the directorship of the Company due to personal reasons;

f) Lt. Gen. Tejinder Singh Shergill was appointed as AdditionalIndependent Director on the Boards of the Company w.e.f. February 12 2018;

g) Ms. Sabina Vaisoha was appointed as Additional IndependentDirector on the Boards of the Company w.e.f. March 27 2018;

h) Ms. Joji Sekhon Gill Dr. Preetinder Singh Joshi and Mr. PradeepRatilal Raniga resigned from their directorships in the Company w.e.f. March 7 19 and 222018 respectively due to personal reasons;

i) Mr. Rohit Bhasin was appointed as an additional independentdirector in the Company on April 19 2018. He subsequently resigned on June 26 2018;

j) Lt. Gen. Tejinder Singh Shergill was regularised as IndependentDirector by the shareholders w.e.f. May 5 2018;

k) Ms. Suvalaxmi Chakraborty Mr. Ravi Rajagopal and Mr. IndrajitBanerjee were appointed as NonExecutive Independent Directors of the Company by the Boardon April 27 2018 and their appointments were regularized by the members of the Company inthe extra-ordinary general meeting ("EGM") of the Company held on May 22 2018.At the same EGM Dr. Brian William Tempest disassociated from his position on the basis ofthe resolution passed by the members;

l) Mr. Harpal Singh Lt. Gen. Tejinder Singh Shergill and Ms.Sabina Vaisoha resigned from directorship of the Company w.e.f. May 20 2018;

m) Mr. Ravi Rajagopal was appointed as Chairman of the Board witheffect from June 1 2018.

As such the re-constituted Board of Directors comprises the followingdirectors as on date:

i. Mr. Ravi Rajagopal - Chairman & Independent Director;

ii. Mr. Indrajit Banerjee - Independent Director; and

iii. Ms. Suvalaxmi Chakraborty - Independent Director

All Independent Directors have submitted declarations that they meetthe criteria of independence as laid down under Section 149(6) of the Companies Act 2013and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

During the Financial Year 2017-18 eight meetings were held by theBoard of Directors. The details of board/ committee meetings and the attendance ofDirectors are provided in the Corporate Governance Report.

Details of KMP are as under:

Name Designation
Mr. Bhavdeep Singh Chief Executive Officer
Mr. Gagandeep Singh Bedi Chief Financial Officer
Mr. Rahul Ranjan Company Secretary

Disclosures regarding the following are mentioned in report onCorporate Governance forming part of this report.

1. Composition of Committee(s) of the Board of Director and otherdetails;

2. Details of establishment of Vigil Mechanism;

3. Details of remuneration paid to all the Directors including Stockoptions; and

4. Commission received by Managing Director and/or Whole Time Director;if any.

BOARD EVALUATION

Pursuant to the provisions of Companies Act 2013 and SEBI (ListingObligations & Disclosure Requirements) Regulations2015theBoard and the resp ectivecommittees are required to carry out performance evaluation of the Board as a body theDirectors individually Chairman as well as that of its Committees.

The following process of evaluation was approved by the Nomination andRemuneration Committee and the Board of Directors:

S. No. Process Remarks Criteria for Evaluation (including Independent Directors)
1. Individual SelfAssessment Self-evaluation forms were shared and completed by the Directors and submitted to Process Co-ordinators. This includes Members Selection and Induction Process Knowledge skills Diligence participation Leadership skills and Personnel attributes.
2. One to One discussion Process Coordinators as recommended by Nomination and Remuneration Committee were authorized to interact with each Board member to assess performance invite direct feedback and seek inputs to identify opportunities for improvement. This includes Board focus (Strategic inputs) Board Meeting Management Board Effectiveness Management Engagement and addressing of follow up requests.
3. Evaluation by the Board Nomination and Remuneration Committee and of Independent Directors A compilation of the individual selfassessments and one to one discussions were required to be placed at the meetings of the Nomination and Remuneration Committee (NRC) the Independent Director's (ID's) and the Board of Directors (BoD) for them to review collectively and include as additional feedback to the formal process completed in the meetings. This includes demonstration of integrity commitment attendance at the meetings contribution and participation professionalism contribution while developing Annual Operating Plans demonstration of roles and responsibilities review of high risk issues & grievance redressal mechanism succession planning working of Board Committees etc.
4. Final recording and reporting Based on the above a final report on Board Evaluation 2017-18 was required to be collated presented and tabled at a meeting of the Board of Directors. NA

The process of board evaluation of the Company was kicked off inFebruary 2018 and thereafter the selfevaluation forms were obtained from the directors asavailable and the process-co-ordinators carried out the one-on-one discussion. Howeverdue to the complete reconstitution of the board no evaluation of the performance by theBoard Nomination and Remuneration Committee or Independent Directors was carried out andthereby no report on the same was placed for FY 2017-18.

The Company endeavors to comply with the law both in words and spiritand the necessary evaluation will henceforth be carried out as done in the past years.

MANAGERIAL REMUNERATION

Disclosures pursuant to Rule 5 of Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are as under:

(a) Comparison and ratio of the remuneration of each director to themedian remuneration of the employees of the Company for the Financial Year 2017-18

Name of the Director Remuneration of Director (Rs in crore) Median Remuneration of employees (' in crore) Ratio

NIL (Refer Note 1)

Note 1- Mr. Malvinder Mohan Singh Executive Chairman did not draw anyremuneration in his capacity of Executive Director during the FY 201718. However infurtherance to the shareholder's approval as accorded on September 27 2016 and thatof Board/Committees in November 2016 Mr. Malvinder Mohan Singh was appointed as Lead-Strategic Initiatives for a period of five years w.e.f. October 1 2016 at a remunerationof Rs 12 crore p.a. Accordingly he was paid a remuneration of Rs 11 crore (approx.) duringthe FY 2017-18. Further post the resignation tendered by Mr. Malvinder Mohan Singh asExecutive Chairman w.e.f. February 8 2018 he continued in his capacity as Lead-Strategic Initiatives of the Company.

In light of pending litigations and investigations the salary andreimbursements payment to Mr. Singh was kept under suspension. The Company sought anexternal legal opinion on way-forward activities. Having considered all necessary factsand taking into account external legal advice the Board decided to treat as non est theLetter of Appointment dated September 27 2016 as amended ("LoA") issued tothe erstwhile Executive Chairman of the Company in relation to his role as ‘Lead:Strategic Initiatives' in the Strategy Function. Basis legal advice taken by theCompany that the payments made to him under this LOA would be considered to be coveredunder the limits of Section 197 of the Companies Act 2013 the Company is in the processof taking suitable legal measures to recover the payments made to him under the LoA asalso to recover all the Company's assets in his possession. Accordingly theemployment of Mr. Singh as Lead- Strategic Initiatives stood terminated with effect fromJune 27 2018 .

(b) The percentage increase in remuneration of each director ChiefFinancial Officer Chief Executive Officer Company Secretary or Manager if any duringthe financial year under review

Name of Director/ KMP Designation

% increase in Remuneration

Mr. Malvinder Mohan Singh Executive Chairman Refer Note 1 above
*Mr. Bhavdeep Singh Chief Executive Officer 10%**
Mr. Gagandeep Singh Bedi Chief Financial Officer 13%**
Mr. Rahul Ranjan Company Secretary 14%**

*It is hereby clarified that the salary reported in March 2016 (FY15-16) of Rs 1115. 40 lacs included the one-time provision in books made of Rs 723.41lacs. This amount was paid in FY 16-17 and was also included in the salary reported inMarch 17 (FY 16-17). Therefore there was a double reporting of the same number of Rs723.41 lacs in FY 15-16 and FY 16-17.

**% increase in remuneration is effective 1st April 2017

(c) The percentage increase in the median remuneration ofemployees in the financial year is 8% (8.9% in the last year) (Median remunerationincrease of the employees is eligible for appraisal as on 1st April 2017)

(d) The number of permanent employees on the rolls of Company is2528 as on March 31 2018.

(e) Average percentile increase already made in the salaries ofemployees other than the managerial personnel in the last financial year and itscomparison with the percentile increase in the managerial remuneration and justificationthereof and any exceptional circumstances for increase in the managerial remuneration

Particulars For the Financial Year 2017-18
(A) Average percentile increase already made in the salaries of employees other than the managerial personnel (KMPs) 6.4%
(B) Percentile increase in the managerial remuneration 10.7%
Comparison of (A) and (B)
Justification 6.4% is the company average excluding KMPs. The increment band for eligible employees was 2% to 17%.
Any exceptional circumstances for increase in the managerial remuneration NA

(f) There is no variable component in the remuneration being paid todirectors

(g) Remuneration paid to Directors and KMPs is as per theRemuneration Policy of the Company.

REMUNERATION POLICY

The Board has on the recommendation of the Nomination and RemunerationCommittee framed a policy for selection and appointment of Directors Senior Managementand their remuneration including criteria for determining qualifications positiveattributes independence of a Director etc. Details of Remuneration Policy and changes ifany are stated in the Corporate Governance Report.

The Company has from time to time familiarised the Board of Directorswith the Company's operations their roles rights responsibilities in the Companynature of the industry in which the Company operates business model of the Company etc.The same is governed by a template viz Board of Directors Governance Standard and it isavailable at http://cdn.fortishealthcare. com/0.35155800-1498650624-board-of-directors-governance-standards.pdf

PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 read with Rule 5(2) ofThe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 inrespect of employees of the Company will be provided upon request. In terms of Section136 of the Companies Act 2013 the Report and Accounts are being sent to the Members andothers entitled thereto excluding the information on employees' particulars which isavailable for inspection by the Members at the Registered Office and/or Corporate Officeof the Company during business hours between 10.00 am to 12.00 noon on working days(except Saturday) of the Company upto the date of the ensuing Annual General Meeting. Ifany Member is interested in obtaining a copy thereof such Member may write to the CompanySecretary in this regard.

RELATED PARTY TRANSACTIONS

There are a few materially significant Related Party Transactions madeby the Company with other related parties which forms part of the Annual Report.Disclosures as required under Section 134(3)(h) read with Rule 8(2) of the Companies(Accounts) Rules 2014 are given in Annexure VI in Form AOC- 2 as specified underCompanies Act 2013.

All Related Party Transactions are placed before the Audit and RiskManagement Committee for approval as required under SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015. Prior omnibus approval of the Audit and RiskManagement Committee is obtained for the transactions which are of a foreseen andrepetitive nature. The transactions entered into pursuant to the omnibus approval sogranted are audited and a statement giving details of all related party transactions isplaced before the Audit and Risk Management Committee for their review on a quarterlybasis.

The Company has developed a Related Party Transactions Frameworkand Standard Operating Procedures for the purpose of identification and monitoring of suchtransactions.

The policy on Related Party Transactions as approved by the Board isuploaded on the Company's website and the same is available at the following linkhttp:// cdn.fortishealthcare.com/Related-Party-Transactions- Framework-Document.pdf

None of the current Directors has any pecuniary relationship ortransaction vis-a-vis the Company except to the extent of sitting fees and remunerationapproved by the Board of Directors and/or shareholders of the Company and as disclosed inthis Annual Report.

RISK MANAGEMENT POLICY

The Company has designed a risk management policy and framework forrisk identification assessment mitigation plan development and monitoring of action tomitigate the risks. The key objective of the policy is to provide a formalized frameworkto enable judicious allocation of resources on the critical areas which can adverselyimpact the Company's ability to achieve its objectives. The policy is applicable tothe Company and its subsidiaries and its employees. The policy defines an architecture andoversight structure to assist effective implementation. The details thereof are coveredunder the Management and Discussion Analysis Report which forms part of the Annual Report.

POLICY FOR PREVENTION PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT

Your Company has adopted a Policy for Prevention Prohibition andRedressal of sexual harassment. As per the requirement of the Sexual Harassment of Womenat Workplace (Prevention Prohibition & Redressal) Act 2013 (‘Act') andRules made thereunder your Company has constituted Internal Complaints Committees (ICC).During the Financial Year 2017-18 the Company has received 6 complaints on sexualharassment and these complaints have been resolved with appropriate action taken and henceno complaint is pending as on March 31 2018. The same may also be read in terms ofCompanies (Accounts) Rules 2014.

DISCLOSURE REQUIREMENTS

As per SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 Corporate Governance

Report with Auditors' certificate thereon and ManagementDiscussion and Analysis Report are attached which form part of this report.

As per Regulation 34 of the SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 a Business Responsibility Report is attached and formspart of this annual report.

CODE OF CONDUCT

Declaration by Mr. Bhavdeep Singh Chief Executive Officer confirmingcompliance with the ‘Fortis Code of Conduct' is enclosed with CorporateGovernance Report.

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to theinformation and explanations obtained by them your Directors make the followingstatements in terms of Section 134(3)(c) of the Companies Act 2013:

(a) in the preparation of the Annual Accounts the applicableaccounting standards have been followed along with proper explanations relating tomaterial departures therefrom;

(b) we have assessed the selection and application of accountingpolicies for their consistent application and made judgements and estimates that arereasonable and prudent so as to give a true and fair view of the state of the affairs ofthe Company at the end of the financial year and of the loss of the Company for theFinancial Year ended March 31 2018;

(c) except for the findings of the Investigation Report includingmatters on internal control described in Note 38 in the Notes to the ConsolidatedFinancial Statements and Note 30 in the notes to the Standalone Financial Statements andour inability at this juncture to make a determination on whether a fraud has occurred onthe Company considering the limitations on the information available to Luthra and theirqualifications and disclaimers as described in their investigation report proper andsufficient care has been taken for the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities;

(d) the Statements have been prepared on a going concern basis forthe reasons stated in Note 41 in the Notes to the Consolidated Financial Statements andNote 33 in the notes to the Standalone Financial Statements;

(e) except for certain systemic and control lapses identified inthe Investigation Report as described in Note 38 in the Notes to the ConsolidatedFinancial Statements and Note 30 in the notes to the Standalone Financial Statementsproper internal financial controls have been laid down and that such internal financialcontrols are adequate and are operating effectively;

(f) except for the matters on related parties and managerialremuneration described in Note 9(4) in the Notes to the Consolidated Financial Statementsand Note 6(5) in the notes to the Standalone Financial Statements and Note 43 in the Notesto the Consolidated Financial Statements and Note 35 in the notes to the StandaloneFinancial Statements in the Notes to the Financial Statements and certain systemic andcontrol lapses as detailed in Note 38 in the Notes to the Consolidated FinancialStatements and Note 30 in the notes to the Standalone Financial Statements there areproper systems in place to ensure compliance with the provisions of all applicable lawsand that such systems are adequate and operating effectively.

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to the CentralGovernment State Governments and all other Government agencies for the assistanceco-operation and encouragement they have extended to the Company.

Your Directors also take this opportunity to extend a special thanks tothe medical fraternity and patients for their continued cooperation patronage and trustreposed in the Company. Your Directors also greatly appreciate the commitment anddedication of all the employees at all levels that has contributed to the growth andsuccess of the Company. Your Directors also thank all the strategic partners businessassociates Banks financial institutions and our shareholders for their assistanceco-operation and encouragement to the Company during the year.

By Order of the Board of Directors For Fortis Healthcare Limited

Sd/-
Date: August 14 2018 Ravi Rajagopal
Place: Gurugram Chairman