NEW DELHI: Some minority shareholders of Fortis Healthcare Ltd have appealed to the Securities and Exchange Board of India (Sebi) to issue directions to Malaysian firm IHH Healthcare Bhd to pay interest to shareholders for the delay in the open offer to buy an additional 26% stake in Fortis Healthcare.
The offer was to be open for subscription from 18 December till 1 January. However, IHH Healthcare could not proceed with the open offer following a Supreme Court’s order to put the transaction on hold.
The shareholders have also appealed to Sebi to issue directions to IHH Healthcare to ensure early resumption of the open offer tendering process, according to two people aware of the matter.
The shareholders said the demand for interest is justified as minority shareholders have been deprived of the open offer dues for a long time. They have also held IHH Healthcare responsible for not taking enough steps to become a party to the case for seeking resumption of the open offer, said the first person mentioned above.
IHH Healthcare has acquired the hospital chain and has not done enough for shareholders to realize the value of their investment through the open offer, the second person alleged.
Regulation 18 (11) of the Sebi (Substantial Acquisition of Shares and Takeover) Regulations, 2011, says that the “acquirer shall be responsible to pursue all statutory approvals required by the acquirer in order to complete the open offer without any delay, neglect or delay".
In July 2018, IHH Healthcare won a multi-pronged bidding war to acquire Fortis and completed the deal in November, buying a 31.1% stake through preferential allotment of shares. To stabilize the business, IHH Healthcare immediately infused ₹4,000 crore in Fortis, but an additional ₹3,400 crore put in an escrow account to initiate an open offer is stuck. The Supreme Court had in December put on hold the Fortis-IHH deal, ordering a status quo with regard to sale following a contempt plea moved by Japanese drug maker Daiichi Sankyo Co. Ltd against the Singh brothers, the former promoters of Fortis.
Thereafter, the Malaysian company, in its regulatory filing, said it will not be able to proceed with the open offer for Fortis Healthcare for the time being. “In light of the order, Northern TK Venture (a unit of IHH) and the PACs (persons acting in concert) will not be able to proceed with the Fortis open offer for the time being until further order(s)/ clarification(s)/ direction(s) are issued by the Supreme Court of India and/or the Sebi," the company said in December. More than five months later the situation remains the same.
Shareholders feel that Sebi should protect the interest of investors. “As a regulator, Sebi can become a party to the case in the Supreme Court for the limited purpose of seeking resumption of the open offer so that shareholders are able to avail the much-delayed open offer opportunity," said the first person mentioned above.
Emails sent to IHH and Sebi did not elicit any response till the time of going to press.
IHH chief executive officer Tan See Leng told reporters in March, “We at IHH fully respect and (have the) highest regard for the Indian judiciary process...we certainly hope India will support foreign investors as well as minority shareholders in Fortis to have their chance to realise the value of their investment through this open offer, which till now has been delayed."
“As the open offer process has been stopped by the Supreme Court itself, there may be a case for minority investors to seek compensation in the form of interest for the delay in the open offer process," said Shriram Subramanian, founder and managing director of proxy firm InGovern Research.