Auditor raises red flag over Fortis results amid ongoing investigations

After delaying its results for the second and third quarters of 2017-18, Fortis Healthcare finally declared its numbers late on Wednesday, but with no comment from the auditors. 

The company’s auditor, Deloitte, refused to comment on the quarterly results, in view of the ongoing investigations by various regulatory bodies, including the Securities and Exchange Board of India (Sebi) and the Registrar of Companies (RoC). 

Fortis reported a net loss of Rs 236.1 million for the quarter ended September 30, compared with a profit of Rs 382.4 million a year ago. For the December quarter, it reported a net loss of Rs 191 million, as against a profit of Rs 4.53 billion in the year-ago period.

Deloitte said, “We have not been able to obtain sufficient appropriate evidence to form a conclusion on the statement and, hence, we do not express a conclusion.” 

Justifying Deloitte’s move, Fortis CEO Bhavdeep Singh told Business Standard the auditor’s statement could have an impact on the investigations. 
 

Deloitte has questioned Fortis’ compliance with the internal control policy for authorising the grant of inter-corporate deposit (ICD) agreements and inadequate availability of security for the ICDs. 

      Other cases 
 

• Escorts Heart Institute & Research Centre has opened tax demands of Rs 992.3 mn
• Directorate of health services, Delhi government, investigating Escorts for unwarranted profits
• Fortis Gurgaon probed for overcharging and negligence after the death of a 7-year-old

“Fortis Hospitals Limited had placed ICDs for a period of 90 days in in terms of agreements dated July 1, 2017, with three companies. These were subsequently assigned to another company on September 30, 2017. On January 5, 2018, the assignment was terminated, after which the loans along with the interest accrued,” the auditor said.  

To this, Singh said, “An investigation has been constituted by the audit committee on loans raised. The audit committee will be able to comment on that in its report.” ICDs, along with interest, amount to Rs 4.83 billion. These ICDs have not been realised by the company. The management of Fortis feels this is recoverable.

Intra-group and related party transactions are also being investigated by the internal audit committee of Fortis. The auditor noted that the hospital chain had not been able to recover unsecured advances of Rs 567.1 million to various vendors. Singh, however, said there were three vendors and the whole amount could be recovered by the end of the fourth quarter of the financial year.  

“These are security deposits for a new corporate office. Advances for a project that did not materialise constitute 80 per cent of the unsecured advances.  The amount will be recovered by the end of the fourth quarter,” Singh said.  Fortis is running with a management committee after Ranbaxy brothers — Shivinder Singh and Malvinder Singh — resigned. The Fortis CEO said a new direction on how the hospital should run would be given once a new investor comes on board.