Why the billionaire singh brothers could be entering endgame phase

Why the billionaire Singh brothers could be entering endgame phase

Two meetings of the boards of directors this week, of Fortis Healthcare and Religare Enterprises, will be in the spotlight, given their promoters’ recent brush with legal and regulatory issues.For the billionaire Singh brothers, Malvinder and Shivinder, former promoters of pharmaceutical major Ranbaxy Laboratories with substantial stakes in Fortis Healthcare and Religare, the legal woes are far from over.

Industry analysts and legal experts say this could mark the beginning of the endgame of the Ranbaxy saga, which began in 2008 when the promoters sold the family’s crown jewel to Japanese drug major Daiichi Sankyo. Sebi scanner on Fortis case after Singh brothers 'take out' Rs 4.73 billion

Nearly a decade after the deal, the Singh brothers’ business empire is now just a shadow of its past, with group companies struggling with large debts and poor profitability.

The group’s shrinking footprint is visible on the bourses, where there has been a steady decline in the stock prices and market capitalisation of the companies owned and promoted by them.The combined market capitalisation of the companies promoted by the Singh brothers is now down to Rs 83 billion from nearly Rs 206 billion on the eve of the Ranbaxy sale .There are currently three listed companies owned and promoted by the Singh brothers — Fortis Healthcare, Religare Enterprises and Fortis Malar Hospital. The latter is a subsidiary of Fortis Healthcare.

Initially there were expectations that group companies would see a rapid rise in revenues and profits as the promoters pumped additional capital into Fortis Healthcare and Religare Enterprises. This triggered a rally in their stock prices after the Ranbaxy deal, but the company’s subsequent financial performance belied the Street’s expectations.

For example, Fortis Healthcare is now struggling to keep pace with its rival Apollo Hospitals after an initial ramp-up in revenues, thanks to a flurry of acquisitions in the initial years after the Ranbaxy deal. In the first five years since its listing in 2007, the company’s revenues jumped seven times and it went past Apollo Hospitals to become the country’s largest hospital company in terms of revenues in 2012-13.

It then hit a growth bump as the expansion had been largely financed through debt, which proved costly when the economic slowdown hit in 2012-13. This led to the company missing out on growth opportunities in the past four years, helping Apollo to get back to the top. Fortis has reported net losses in three out of the last five years.The group’s financial services arm, Religare Enterprises, has shown a similar growth trajectory and is now struggling to remain profitable after a phase of rapid growth following its listing in 2007. The company’s revenues were down 27 per cent in 2016-17 and it has reported losses in four out of the last five years.

Industry analysts say the legal and regulatory woes of the Singh brothers are far from over. Amid allegations of siphoning off funds, the spotlight is now on the board of directors of Fortis Healthcare and Religare Enterprises. Amit Tandon, founder and managing director, Institutional Investor Advisory Services, a proxy advisory firm, said the board of directors of Fortis Healthcare should institute a forensic audit. “This will help them to come out independent of the promoters,” he said.In another attack on corporate governance practices in Fortis Healthcare, another proxy advisory firm, Stakeholders Empowerment Services (SES), noted in a report titled “Fortis Healthcare: Fiefdom of Singh Brothers” that “the Indian ingenious mind could have discovered a way for avoiding Related Party Transaction approval. Do transaction with nondescript company and then buy the company, very simple”.

J N Gupta, managing director, SES, too, called for a thorough investigation of the affairs of both Fortis Healthcare and Religare Enterprises.