Mumbai: Fortis Healthcare Ltd’s audited results are in, the last missing piece in its FY18 financial results. The headline audited numbers don’t vary from the unaudited results, but the auditors’ report and revised notes to accounts reveal new and more troubling information. Here’s what’s new in terms of disclosures:

In all, the auditors have qualified the financial statements on seven counts, no mean feat.

The main problem confronting Fortis has been the inter-corporate deposit (ICD) given by its subsidiary Fortis Hospitals Ltd, with the outstanding amount at 445 crore, which found its way to companies controlled by the promoter. Since the recovery of the ICDs itself is in question, the auditors have said that the interest income on these ICDs (and on a property advance transaction) amounting to 44.3 crore is not compliant with accounting norms, overstating interest income to that extent.

More importantly, another suspicious transaction has come to light. Fortis Hospitals acquired equity in Fortis Emergency Services Ltd from a promoter group company. On the same day, Fortis Hospitals then lent money to Fortis Emergency, which used the money to repay loans taken from another group company.

The auditors have said it is possible that this same money was routed back to repay ICDs taken from Fortis Hospitals. That is, using Fortis Hospitals’ own funds to repay itself.

That’s not all. The audit committee approved the equity transaction but not the loans to subsidiaries. What’s more, the equity investments and loans given were higher than the enterprise value of the companies. Another subsidiary, Fortis Healthstaff Ltd, that carried out a similar transaction was named earlier.

Fortis had invested in an overseas fund, and had said it was proposing to exit this fund. Now, it transpires that the investment was sold after 31 March at a discount of 10%. The company has provided for a loss of 55.1 crore on this investment but the auditors are unsure if this will be enough. While the notes say this amount has been provided for, this was not disclosed when the unaudited financials were reported.

Earlier,when it declared its unaudited results, Fortis had said that it had declared as void a contract that had appointed former executive chairman Malvinder Singh, as lead—strategic initiatives. It had said that it would attempt to recover payments made towards this post and recover company assets in his possession. Now, the amount has been revealed. Recovery under this head (and for excess remuneration paid) amounts to 20 crore. That's money paid out of a company that was already facing financial problems.

The loss incurred in FY18 was 934 crore and the company’s current liabilities exceed its current assets by 853 crore. But it generated positive cash flow from operations, according to notes to its financial statements, and has obtained a line of credit for 120 crore. That’s why the financial statements are prepared on a going concern basis.

The audited financials have seen some new facts emerge and more light thrown on already known issues. The company has clarified that provisions for known issues have been made and more will be made when investigations conclude on new matters. That keeps the scope open for more provisions in the coming quarters.

For the moment, all eyes will be on the brave bidders for Fortis who are persevering despite all these issues. The company has said it will reveal its recommendation to shareholders in the coming days.

Its shares had fallen after its unaudited results were reported but have regained losses. Investors are still hopeful that the underlying strength of Fortis’s operating hospital business will overcome concerns on the state and quality of its financials. Given these new revelations, that hope may prove misplaced.

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