Advisory committee's wings clipped by the Fortis board, says Amit Tandon

The advisory committee to evaluate bids for Fortis Healthcare should have been empowered to do much more, said Amit Tandon, MD,  Institutional Investor Advisory Services India Limited (IIAS).

"Here they have been kind of, their wings have been clipped in a sense when they have been asked to look at only the binding bids, Tandon told CNBC-TV18 in an interview.

We are actually echoing the questions which the shareholders have been asking. The shareholders at this stage are saying that giving the past association of the existing board, they are kind of not comfortable with the board taking decisions at this stage. We had recommended that the company appoint an advisory committee and we are very happy to note that they have appointed an advisory committee. But then the question is if you have appointed an advisory committee our view was that they should run an open process which means that everyone who is interested should be allowed to bid.

What the board has told the advisory committee is you should look at only the binding bids. Our view is also that there are some existential questions which the company needs to be asking itself. Does it want to be institutionally owned and professionally managed? Is it better served with having foreign shareholding, is it better served by having an Indian shareholder and again these are questions which advisory committee should be asking. Once these answers are in place and maybe the board has been broad based, then do the sale process.

Given the fact that investors are questioning the legitimacy of the board at this stage. It is quite obvious that they will also question the validity of the sale process. So, we are saying the board needs to kind of pause for a moment, take a hard look at where it is, and figure out what is it that it can do to make the whole process far more open than it is and then go ahead with whatever they are doing.

Let me answer the second question first, the company has raised some money, so, therefore, the immediate liquidity is no longer a concern. Our own believe is that with five bidders on the table and how many assets do you see that happen, bankers themselves would be more than willing to open their cheque book today than they were three weeks ago.

Coming back to the fact that yes while there is an advisory committee our grouse here is that it is only two bids that they are looking at. If you have got five bids on the table, you need to open up the process to ensure that you are able to consider all of them which leads to better value for the existing investors.

We have been speaking to investors, market intermediaries, others who are involved with the process either directly or indirectly. So we have kind of put our view based on what we are hearing, what our own views are, we have kind of put it together in the commentary which we put out today.

All we said is that having five bids is unprecedented, so if it doesn’t go out you need to remember that the investors who are most vocals are global investors and the domestic investors at this stage. For global investors everything is on the table, so why should you rule it out. Unless there is a well-documented open process which the board is doing, so it is to my mind something which the board should factor in, but they are taking decisions.

The board need to be nudged in that direction. We did asked them to appoint an external advisory committee which they did but it is only in part. Our view was that the advisory committee then should be empowered to do much more. Here they have been kind of, their wings have been clipped in a sense when they have been asked to look at only the binding bids. So, what is it that makes it possible for the others bring in binding bids?

Have they spoken to IHH or Manipal and said look what if we were to change the bid terms now will you look at it on a different structure. The same question could be asked for the other non-binding bidders as well. That is what we expect the board to be doing at this stage — proactively interacting with the various bidders to ensure that there is value maximisation for investors.