Fortis sale transaction under fire by advisory firm

The IiAS report pointed out that the independent advisory panel may not be independent.

Both Rohit Bhasin, who was appointed additional director, and Deepak Kapoor, who had been appointed head of the expert advisory committee, are closely associated with PricewaterhouseCoopers (PwC), a firm that has been the auditors of the Religare companies (companies by the same group) for a long period of time.

Standard Chartered, which was appointed to aid the expert advisory committee, was a large investor in Fortis in the past, through its private equity arm.

As of March 31, 2017, Standard Chartered Private Equity (Mauritius) III Limited owned a 3.05% stake in Fortis.

The advisory firm's main concern was that the advisory firm was looking at only two bids, IiAS Founder Amit Tandon told CNBC-TV 18, and added that everyone should be allowed to bid for Fortis.

Adding that investors would also question the validity of the sale process, he said Fortis should pause and make the process transparent.

A footnote in the report stated that IiAS recommended voting against the appointment of Lt. Gen. Tejinder Singh Shergill as an independent director to the board of Fortis, at their recent postal ballot.

Renuka Ramnath, appointed a member of the expert advisory committee, is an independent director on the board of IiAS .

Recently, shareholders East Bridge Capital and Jupiter Asset Management, which have a combined stake of 12% stake in Fortis, sought to dismantle the board and called for an EGM for the formation of a new board.

“Investors have questioned the legitimacy of Fortis Healthcare Limited’s (Fortis) existing board because all its current members have had past tenured relationships either with the Singh brothers, or with companies of the group,” IiAS said.

Linking the pattern of putting close aides in decision making positions, IiAS  advised was to set up a committee to help the company decide which of the five bids best suited Fortis.

In its last board meet announcement Fortis clearly stated that only binding bids will be accepted.

Currently the TPG-Manipal & Munjal-Burman bids are binding in nature. Burman-Munjal has revised their offer and made it binding without due diligence just ahead of the last board meet.

This leaves global players IHH, Fosun with non-binding offers. The deadline for submitting final binding bids ends on April 24.

Sources said that IHH, Fosun, KKR-Radiant may come up with a binding offer by end of the deadline.

The board of Fortis has decided to meet on April 26 to take a final decision after the advisory board submits its views.

IiAS ended the note questioning the legitimacy of the Fortis sale process with a final warning, “If the board continues its current path, we may see another unprecedented event: a Indian class-action suit.”

Institutional Investor Advisory Services India Limited (IiAS) is a proxy advisory firm that provides voting recommendations on events such as annual general meetings and postal ballots for over 600 companies.