Fortis Healthcare, one of the largest hospital operators in the country, on Thursday said it will hire an external legal firm to probe the alleged siphoning of Rs 473 crore by its billionaire promoters Malvinder Singh and Shivinder Singh from the publicly-traded company without board approval. Fortis, in its second and third quarter earnings statement, said its audit and risk management committee has decided to carry out an independent investigation through an external legal firm.
The investigation will cover inter corporate deposits (ICDs) given by a wholly owned subsidiary of the company, intragroup and related party transactions, including compliance with applicable laws and regulations, it said. The Singh brothers stepped down last month from the board of the company they control over an unrelated court verdict against them. The probe, however, is over the alleged Rs 473 crore "financial impropriety'' that happened a year ago.
Earlier, Fortis defended its promoters, saying said the company loaned the sum in the normal course of treasury operations to some entities, which later became part of the founders' group due to a change in shareholding. The loans have since been recognised as related-party transactions, and repayment has commenced.Fortis Healthcare had said the brothers will pay the company back by June this year. On Thursday, the firm said it got a letter from capital markets regulator Securities Exchange Board of India (Sebi) on February 16 confirming that it was setting up a probe in the matter.
Sebi had asked the company to provide information and documents relating to the fund transfer. Fortis said they provided some of the information and documents requested, and sought more time to submit the rest. The company said it also got a notice from the Registrar of Companies (RoC), seeking information on the same. The company's auditor, Deloitte Haskins & Sells LLP, which reportedly refused to sign off on the July-September quarter results until the money that Singh brothers had taken out from the company was accounted for or is returned, in its notes on the earnings said it cannot comment on the firm's financials pending outcome of the investigation.
"Pending completion of the aforesaid investigations, we are unable to conclude on the effects, if any, of the outcome of the same on the financial results, state of affairs, cash flows and operations of the company," it said. The government has asked the Serious Fraud Investigation Office (SFIO) to inform it of beneficiaries in the alleged fund diversion within three months. The firm did not declare financial results for the quarter-ended September 30, 2017, and paid Rs 65.98 lakh in fine to stock exchanges for not publishing it within stipulated time. Further, Fortis also sought an extension for declaring results of the October-December quarter.
On Thursday, the company declared results of both the quarters together. It reported net losses for both the quarters - Rs 23.61 crore for July-September compared to Rs 38.24 crore in the year ago period, and Rs 19.10 crore for October-December as opposed to a profit of Rs 453 crore on a one-off gain by an associate company in the year-ago period. Malvinder and Shivinder Singh resigned as directors from the firm's board in the wake of a Delhi High Court verdict upholding a Rs 3,500 crore award in favour of Japanese pharmaceutical major Daiichi Sankyo.
Daiichi bought control of Indian drugmaker Ranbaxy from a shareholder group led by the Singh brothers in 2008, and alleged in 2013 that former shareholders of Ranbaxy hid information about US regulatory probes into the company. Once India's largest drugmaker, Ranbaxy was eventually sold by Daiichi to Sun Pharmaceutical Industries in 2014.