Mumbai: Hedge fund East Bridge Capital and Jupiter India Funds’ move to replace four Fortis Healthcare Ltd directors has drawn support from large shareholders, three people directly aware of the development said.

The disgruntled investors, including funds representing close to 30% of Fortis’s shareholding, are expected to support East Bridge in the special meeting on 22 May to decide the fate of directors Brian Tempest, Harpal Singh, Sabina Vaisoha and Tejinder Singh Shergill, the people said, requesting anonymity.

Under current rules, investors with 10% or more stake can call for a special meeting of shareholders. “Foreign funds that hold large stakes in Fortis include BlackRock, York Capital and Elliott Management apart from East Bridge," said one of the three people cited above.

Emails sent to BlackRock, York Capital and Elliott Management did not elicit a response.

Mint was the first to report on 2 April on East Bridge’s plans to block Fortis’s sale to Manipal-TPG over valuation concerns.

On 10 May, the Fortis board approved an offer from Sunil Munjal’s Hero Enterprise and Dabur chairman Anand Burman’s family office to sell a 16% stake for Rs1,800 crore.

“These shareholders are unhappy with the board’s decision to accept the Munjal-Burman offer," said the second of the three people cited earlier. The investors plan to call for fresh bids for the hospital chain if the board members are replaced, this person said.

The transaction, if approved by shareholders, will not trigger an open offer because the proposed stake sale is less than the 26% threshold under takeover law.

Fortis’s other bidders include TPG-Manipal and IHH Healthcare. Both have since said they were disappointed with the board’s decision and have sought support from shareholders without disclosing their strategy, but the persons cited above said both are open to the option of separate open offers if the situation so demands. A spokesperson for TPG-Manipal declined to comment. Emails sent to IHH Healthcare remained unanswered.

Despite mounting losses, intense competition for acquiring Fortis has led to its valuation shooting up sharply in the last three months.

The price-to-earnings (PE) ratio for Fortis is currently at a premium of 73% to Apollo Hospitals, the largest hospital chain in the country. Within a span of three months, the PE ratio for Fortis rose from 29.3 on 6 February to 71.3 on 4 May. According to the last available audited results, Fortis has reported a loss of Rs37.5 crore in the fourth quarter of fiscal 2017 from a profit of Rs453 crore a year earlier.

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