Malaysia’s IHH Healthcare will be able to go ahead with its open offer for Fortis Healthcare only if the Securities and Exchange Board of India (Sebi) agrees with its legal interpretation, that the Supreme Court’s September order has lifted all such restraints.
In an interaction with FE on Wednesday, IHH managing director and CEO Kelvin Loh said that they are currently in consultations with Sebi on the matter and awaiting its response. He said that the company would like to go ahead with the open offer “as soon as possible”, as there has already been a delay of four years.
IHH had in July 2018 acquired a 31% stake in Fortis Healthcare for Rs 4,000 crore through the bidding route. It had also earmarked Rs 3,000 crore to make an open offer for an additional 26% to the public shareholders, as required under the law.
Ravi Rajagopal, chairman of Fortis Healthcare, added that their legal counsel has advised that the company can go ahead with the open offer, as the SC order has disposed of various appeals, including the suo motu contempt. “We have represented to the Sebi and the matter is with them,” Rajagopal said.
However, legal observers told FE that the matter is not that straightforward and simple, as the Delhi High Court has to take a final call on the matter of an open offer, as well as whether a forensic audit has to be done in the share sale, which was executed in 2018.
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Loh and Rajagopal agreed that Sebi’s legal interpretation needs to be on the same page as their’s, and the possibility that the matter may take a different turn when it comes up in the Delhi High Court cannot be ruled out. “Had the SC order been categorical on open offer, there would not have been an issue of interpretation,” Rajagopal said, adding that when the matter comes up in the HC, they would present their stand.
On September 22, a bench led by former Chief Justice UU Lalit, while disposing of various appeals, including suo motu contempt, had directed the HC to decide all the related issues while considering the execution proceedings. The SC order said that the Delhi HC should consider ordering a forensic audit to analyse whether transactions entered into by the banks and financial institutions were bona fide. It added that the forensic auditors should also look into the transactions between Fortis Healthcare and RHT, and also other related transactions by which Rs 4,000 crore received from IHH was transferred.
On its part, Fortis has all along maintained that it did not commit any wrong and a new management and board, which had no connection with the former promoters, Malvinder Singh and Shivinder Singh, took decisions which were vetted by reputable agencies like EY, Deloitte and KPMG. Loh said that IHH had done proper due diligence while acquiring 31% stake in Fortis through preferential allotment of shares.
After the sale of Fortis to IHH materialised in July 2018, Japanese pharma major Daiichi Sankyo had moved the court alleging that the Singh brothers had created fresh encumbrances on their shares, which was barred by the SC. According to Daiichi, despite the statements and undertakings given by the former promoters to the HC, they had alienated their shareholding from time to time without informing the HC.
Daiichi Sankyo is pursuing the enforcement of a Rs 3,500-crore arbitration award against the Singh brothers pronounced by a Singapore tribunal, for concealing information when they sold Ranbaxy Laboratories to it for $4.6 billion in 2008.
Loh said there was no requirement to change the offer price for the open offer, which was fixed at Rs 170 per share when IHH signed the deal with Fortis in 2018. On Wednesday, Fortis shares closed down 2.71% at Rs 279.50 on the BSE.
Rajagopal said that Fortis wants to expand and six-seven of its hospitals are currently undergoing expansion, which will take its total bed strength to 5,000 in the next two years from the current around 4,000. IHH will also initiate the process to change the brand name from Fortis to Parkway, by which its hospitals are known elsewhere.