India: Cash-strapped Fortis board to consider fundraising on Friday

Photo: Reuters

Cash-strapped Fortis Healthcare Ltd, which is in the process of finding a new investor, said Wednesday its board would meet on 13 July to consider raising funds through issue of securities on a preferential allotment basis. The Fortis Healthcare board will meet “to consider, and if thought fit, approve raising funds through issue of securities on a preferential allotment basis”, it said in a regulatory filing. It, however, did not disclose details of the quantum of funds to be raised.

IHH Healthcare Ltd has emerged as top bidder for Fortis, even as a consortium of TPG Capital and Manipal Health Enterprises didn’t match up and Munjal-Burman and Radiant Life Care backed out.

Fortis has been trying to find a new investor for months, and—on two separate instances—accepted offers from TPG-Manipal and Munjal-Burman combines only to scrap them and go in for fresh bidding.

As part of a new criteria set up by the Fortis board on 29 May, the potential buyer has to make a minimum investment of Rs 1,500 crore into Fortis Healthcare by way of preferential allotment. Apart from having a plan for funding the acquisition of RHT Health Trust, suitors should also have a plan for providing exit to private equity investors of diagnostics arm SRL Diagnostics Ltd.

The backing out of Munjals-Burmans combine and Radiant Life happened days after Fortis Healthcare announced that it has initiated legal action to recover about Rs 500 crore of funds given as inter-corporate deposits to the firms controlled by former promoters Malvinder and Shivinder Singh. The loans were given without board approval and enough collaterals.

Also read: Brothers Singh and the squandering of a business empire

Fortis had also stated that market regulator—Securities and Exchange Board of India—has ordered a forensic probe into the company’s matters.

On 22 May, the company’s shareholders voted out Brian Tempest from the board of directors in an extraordinary general meeting (EGM). He was among four directors of the company whose removals were sought by two institutional investors. Three directors—Harpal Singh, Sabina Vaisoha and Tejinder Singh Shergill—had resigned before the EGM. Shareholders had voted in favour of appointments of Suvalaxmi Chakraborty, Ravi Rajagopal and lndrajit Banerjee as independent directors on the board.

The reconstituted board then called for fresh bidding after getting consent from the Munjal-Burman combine, whose bid for investing Rs 1,800 crore was approved by the earlier board, to enable the company to move ahead with the fundraising transaction.

On 2.25pm Wednesday, Fortis Healthcare shares rose 1.67%, or Rs 2.35, to Rs 138.00.