Shares of Fortis Healthcare and Religare Enterprises tumbled at 11:38 IST on BSE on media reports that the market regulator Securities and Exchange Board of India has ordered a serious fraud probe into the dealings of these two firms.
Fortis Healthcare (down 5.12% at Rs 138.85) and Religare Enterprises (down 5% at Rs 60) declined.
Meanwhile, the S&P BSE Sensex was up 68.10 points or 0.2% at 33,842.76.
With regard to news appearing in media titled "Fortis, Religare face serious fraud probe; Sebi orders inquiry", Fortis Healthcare issued a clarification to the stock exchanges after market hours yesterday, 19 February 2018. Fortis said that it has not received any communication, written or otherwise, from any government authority with regard to such a purported investigation and as such it has no knowledge of any investigation against the company.
Fortis Healthcare disclosed to the exchanges on 17 February 2018 that it has received a communication from Securities and Exchange Board of India (Sebi) dated 16 February 2018, confirming that an investigation has been instituted by Sebi in the matter of the company. Sebi has asked to furnish information and documents as mentioned therein by 26 February 2018. The company is in process of collating the said information and will be sharing the same with Sebi in due course, it added. The financial implication/compensation/penalty and quantum of claims has not been referred in the aforesaid letter and hence cannot be ascertained, Fortis added.
The Supreme Court (SC) on 15 February 2018 paved the way for the sale of the shares pledged to lenders by former board members Malvinder and Shivinder Singh. It had blocked the sale of all Fortis Healthcare shares owned by Fortis Healthcare Holding (FHHPL) on 31 August 2017 on a petition by Japanese drug maker Daiichi Sankyo to prevent the Singhs from diluting the value of assets. The Singhs had approached the SC for permission to appeal a judgment of the Delhi High Court (HC) in January allowing Daiichi Sankyo to enforce the Rs 3500-crore arbitration award. The apex court clarified that the status of the shares encumbered on or before that date do not have to be maintained. FHHPL held 34.33% stake end December 2017. Of this, 98.22% equity was pledged or otherwise encumbered.
Fortis Healthcare's board on 13 February 2018 had accepted the resignation of the Singh brothers from 8 February 2018. As an interim measure, a management committee has been constituted to oversee the functioning from a strategic and operational guidance perspective.
Meanwhile, as per media reports, the auditors of Fortis Healthcare, Deloitte Haskins & Sells Llp, have refused to sign the accounts for Q2 of FY 2018 results amid suspicion of misappropriation of funds by the Singh brothers. The Singh brothers were alleged to have siphoned at least Rs 500 crore without board approval about a year ago. The funds were reported on the balance sheet of Fortis Healthcare as cash and cash equivalents, but the money was routed and placed under the control of the Singhs at the time.
In a clarification to the stock exchanges, Fortis Healthcare said that Fortis Hospitals, a wholly owned subsidiary of Fortis Healthcare, has deployed funds in secured short-term investments with companies in normal course of treasury operations. These entities as of the quarter ended 31 December 2017 had become part of the promoter group due to a shareholding change in those entities. Subsequently, the same loans were recognized as related-party transactions in compliance with necessary regulatory requirements. These loans of Rs 473 crore are adequately secured and the repayment has since commenced.
Meanwhile, Derive Investments bought 26.58 lakh shares of Fortis Healthcare at Rs 144.50 per share in a bulk deal on the NSE yesterday, 19 February 2018.
Fortis Healthcare is a leading integrated healthcare delivery service provider in India. The healthcare verticals of the company primarily comprise hospitals, diagnostics and day care specialty facilities.
Fortis Healthcare's consolidated net profit fell 10.5% to Rs 22.61 crore on 3.2% rise in net sales to Rs 1156.61 crore in Q1 June 2017 over Q1 June 2016.
Religare Enterprises (REL) also clarified in a stock exchange filing today, 20 February 2018 that it has not received any formal communication, from any government authority with regard to purported investigation by Sebi.
Meanwhile, REL announced after market hours yesterday, 19 February 2018 that its committee at a meeting held on 19 February 2018, approved raising of funds through issue of warrants through preferential issue by issuing up to 17.55 crore warrants of Rs 52.20 each, exercisable into equal number of equity shares of Rs 10 each of the company on a preferential basis amounting upto Rs 916.42 crore.
The allotment of the aforesaid warrants shall be subject to the approval of shareholders of the company in the extra-ordinary general meeting (EGM) of the company scheduled to be held on 19 March 2018.
REL is the holding company for one of India's leading diversified financial services groups. REL offers an integrated suite of financial services through its underlying subsidiaries and operating entities, including loans to SMEs, affordable housing finance, health insurance and capital markets.
Religare reported a net loss of Rs 41.68 crore in Q3 December 2017, compared with net loss of Rs 43.28 crore in Q3 December 2016. Total income rose 4.3% to Rs 7.97 crore in Q3 December 2017 over Q3 December 2016.
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