Mumbai: Institutional Investor Advisory Services (IiAS), a proxy advisory firm, on Tuesday said the Fortis Healthcare board and the advisory committee appointed to decide the new owners of the Gurugram-based hospital chain have widened the trust deficit with investors.
“Investors have called for greater independence at the board level to support an objective decision-making process," IiAS said in a report. “Administering a selling process that limits the full discovery of price leaves investors worried that they are being short-changed," it added.
On 18 April, some of Fortis’s investors such as Jupiter Asset Management Ltd and Eastbridge Group, who together hold 12.04%, asked the firm to convene an EGM to remove at least four board members and appoint three independent directors on the Fortis board.
Both Rohit Bhasin (appointed additional director) and Deepak Kapoor, who has been appointed head of the expert advisory committee, are closely associated with PricewaterhouseCoopers (PwC), a firm that has been the auditor of the Religare firms (firms by the same group) for a long period of time.
Standard Chartered, which has been appointed to aid the expert advisory panel, was a large investor in Fortis in the past (through its private equity arm; on 31 March 2017, Standard Chartered Private Equity (Mauritius) III Limited owned 3.05% of Fortis’ equity).
“Investors have questioned the legitimacy of Fortis Healthcare Ltd’s (Fortis) existing board because all current members have had past tenured relationships either with Singh brothers, or with companies of the group," IiAS said.
“The legitimacy of Fortis’s board is under question and, therefore, the legitimacy of the process it has adopted to sell the company is equally under question," it added.
Despite these uncertainties, Fortis has attracted bids from five firms: TPG-Manipal, IHH, Munjal-Burman family combined, Fosun and KKR-Radiant.
“If the board continues its current path, we may see another unprecedented event: an Indian class-action suit," IIAS said.
Under the Companies Act, 2013, if 100 shareholders (in case of firm with share capital), or 10% of the holding interest, or depositors find the firm’s affairs are not being managed in its best interests, after this notification they can collectively approach NCLT for redressing the situation, which is called class action suit..