SFIO to probe Fortis, Religare for alleged 'loan' to Singh brothers

Days after Fortis Healthcare promoters - Malvinder Singh and Shivinder Singh - stepped down from the board of Fortis and diversified financial services firm Religare Enterprises, the Serious Fraud Investigation Office (SFIO) under the Ministry of Corporate Affairs said it will initiate a probe into alleged financial irregularities at Fortis Healthcare and Religare Enterprises.

According to a report in PTI, the corporate affairs ministry has been looking into the affairs of Fortis Healthcare and Religare Enterprises after recent reports that financial irregularities have emerged at the two companies. A senior ministry official said an SFIO probe has been ordered against the two companies. The SFIO, under the ministry, mainly probes white collar crimes.

This comes close on the heels of reports alleging that the Singh brothers took Rs 473 crore from their publically listed company, Fortis Healthcare without the board approval. Fortis had earlier issued a release saying the resignation is "intended to free the organisation from any encumbrances that may be linked to the promoters in light of the recent HC judgement."

According to a report in Bloomberg, the funds were mentioned as cash-and-cash equivalents in the company balance sheets but the money was allegedly routed to the Singh brothers. The report didn't confirm where the money was used, but cites it a reason that the company has not released its second quarter results so far.

Refuting the allegations, Fortis Hospitals said it deployed funds in secured short-term investments with companies in normal course of treasury operations. The company release to BSE says the "loans" are fully "secured", and are being repaid.

The Bloomberg report alleges that Fortis's auditor, Deloitte Haskins & Sells LLP, didn't sign off the Q2 result report due to the same reason. "We categorically deny the alleged news that the auditors have refused to sign the accounts for Q2. The limited review process for Q2 and Q3 results is in progress and already sent to your office by February 7," Fortis said in the BSE filing.

Fortis Healthcare has also come under the lens of Sebi, which launched an investigation into alleged regulatory lapses. On Saturday, Fortis informed the exchanges that Sebi, which has instituted an investigation, has sought information and documents by February 26. Sebi Chairman Ajay Tyagi, on February 10 said that the regulator was examining the Fortis issue. "We also received a reference on Religare from somewhere I cannot disclose and it will be looked into," he had said.

Rs 3,500 crore arbitral award

On February 2, a single judge bench of Justice Jayant Nath of the Delhi High Court directed the Singhs to pay Rs 3,500 crore to Japanese drug maker Daiichi Sankyo - that's 35 per cent of the Rs 10,000 crore the Singh brothers had received for selling their stake in Ranbaxy - then valued at $ 4.6 billion - to Daiichi in 2008.

When the Singhs sold their drug company Ranbaxy to Daiichi Sankyo in 2008, the US Department of Justice was investigating a complaint on the basis of a report submitted by whistleblower and company's former employee Dinesh Thakur in 2005. In September 2008, the US government issued a warning to Ranbaxy for 30 of its products, but the deal with Daiichi was signed in November same year.

Diversion of $300 million

On January 30, a New York-based investor, Siguler Guff & Co, which has six per cent stake in Religare Finvest, alleged the Singhs indulged in "diversion and siphoning" of funds to clear their personal debts of at least $1.3 billion. The Singhs allegedly gave 21 loans worth millions to independent companies that rerouted at least $300 million to private firms linked to the brothers on the same day. Religare had said "all the allegations are completely baseless and have been responded to by Religare in the High Court of Delhi."

Manipal in merger talk with Fortis Health

Manipal Hospital, backed by US investment company TPG, is in talks to merge Fortis Healthcare with itself. Bombay Stock Exchange has sought clarification from Fortis Healthcare with reference to reports of Manipal Hospital's merger talks with Fortis Health.

with PTI inputs