Financial fraud may be behind exodus at Fortis Healthworld

Financial fraud may be behind exodus at Fortis Healthworld
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First Published: Wed, May 07 2008. 12 04 AM IST
Updated: Wed, May 07 2008. 12 04 AM IST
Mumbai: The exodus of senior executives, including the chief executive, from Fortis Healthworld Ltd, a pharmaceuticals retailer, first reported by Mint on 3 May, could have been brought about by their possible involvement in improper financial transactions four months ago, according to two people familiar with the matter who do not wish to be named.
One of these, a senior executive at Fortis Healthworld, claimed at least nine top executives, including chief executive officer Ashish Kripal Pandit, were asked to leave in the first week of March after the company discovered the misappropriation of funds. The official, who asked not to be identified because he claimed an investigation into this was currently on, didn’t put a value to the misappropriation, but described it as “multi-crore”.
Fortis Healthworld is a privately held affiliate of publicly traded Fortis Healthcare Ltd, which is promoted by the Singh family that controls and manages Ranbaxy Laboratories Ltd, one of the country’s biggest and best-known pharmaceutical firms. Fortis Healthcare’s managing director Shivinder Mohan Singh was not available for comment.
In an email response, Sunil Godhwani, a director at SRL Ranbaxy Ltd, the firm which now oversees the functions at Fortis Healthworld, said: “We, as a group, believe in building globally scalable businesses of excellence. Performance and value creation are the key mantras for us. All group employees are encouraged and mentored to ensure that there are no compromises on this front.”
Godhwani, who is also managing director and chief executive of Religare Securities Ltd, a financial services company also controlled by the Singh family, did not directly answer a question on whether the employees who left the company recently had done so in the wake of discovery of financial misdemeanours, and would only say that “these individuals have left the organization after tendering in their formal resignations, which were accepted by the management. Our growth and future plans remain unaltered.”
However, the executive who described the magnitude of what he termed a “financial scam” as “multi-crore” said it “involved investments in infrastructure development, franchise acquisitions, and stock purchases for the retail business.” According to him, senior executives received paybacks from franchises and pharmaceutical suppliers, and also manipulated floor space of the retail outlets in the books for inflating cost of acquisition, rental and furnishing expenses. “A review audit is currently going on in the company since the scam was unearthed in January, and no police complaint on this fraud has been filed as yet by the company,” he said.
Another person familiar with the developments at Fortis Healthworld, and who did not wish to be named, said “the top management had temporarily stopped all fresh investments and even the bill payments to the vendors,” after the issue came to light.
Former chief executive Pandit, who is set to join a telecom firm in the UK, denied there was any misappropriation of funds, and said his decision to move was purely personal.
The executive said that other Fortis executives who were asked to leave the firm include company secretary Shitij Wadhwa, sales and operations manager Amit Mathur, head of infrastructure development Abhinav Raina, head of information technology services Ajay Shrivastava, head of franchise acquisitions and operation Amit Sinsinwal, a senior executive in the data analysis department, Sonal Shrivastava, and personal assistant to the CEO, Ashis Chakraborty.
As reported previously by Mint, Sanjeev Choudhry, chief executive of Ranbaxy affiliate and diagnostics firm SRL Ranbaxy, confirmed that he has been given the additional charge of Fortis Healthworld.
“The management rejig is a positive development for a new entity experimenting with a new concept. We are bringing in new people by leveraging the strengths and synergies within the group,” Choudhry said last week.
Fortis Healthworld was launched in early 2007 and it planned to open at least 1,000 drug stores across the country by 2012. The firm currently runs 50 pharmacies, mostly in and around New Delhi, Chandigarh and Ludhiana. Its retail network includes directly operated stores as well as franchise outlets.
Fortis Healthworld now plans to expand its retail network to 100 stores over the next two years through the organic route, and add another 400 or more stores through acquisitions to take its presence beyond the northern parts of the country.
The exits at Fortis Healthworld come at a time when several big pharmacy chains have slowed their expansion plans because of soaring real estate prices, lack of trained manpower and rising salaries.
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First Published: Wed, May 07 2008. 12 04 AM IST