Four members of Fortis board under scrutiny, all eyes on EGM

Manipal-TPG, Munjal-Burmans, Malaysia's IHH, KKR-backed Radiant Life Care and China's Fosun bid for Fortis after it fell into financial problems. Its former promoters, the Singh brothers, are also under investigation for siphoning funds out from the company.

Last week, the four directors along with another additional director Rohit Bhasin had voted in favour of Munjal-Burmans offer.

Three other directors Suvalaxmi Chakraborty, Ravi Rajagopal and Indrajit Banerjee representing minority shareholders East Bridge Capital and Jupiter India Fund opposed the offer.

The offer will now have to be approved by shareholders.

Some media reports said that Fortis' financial advisers  - Arpwood Capital and Standard Chartered Bank, and legal adviser Cyril Amarchand Mangaldas - were also against the Munjal-Burmans' offer.

Analysts have questioned the board's earlier decision to allow bids without due diligence, saying it did not lead to efficient price discovery.

“There is room for bidders to increase the price if they have greater certainty on what to expect: in having to bid blind, some of them could have likely priced in an exaggerated approximation of the potential liabilities,” said proxy advisory firm IiAS.

The directors have defended their decisions, stating that due diligence would delay the offers and would address the company's "immediate financing needs".

In their notice calling for the EGM, East Bridge Capital and Jupiter said the current members of the board "do not fairly represent the interest of all shareholders and the company, and considering the recent events, their continuance on the board is untenable."

IiAS also recommended supporting resolutions of East Bridge Capital on removal of the four directors.

Commenting on the issue, Ranjai Pai of Manipal Hospitals told Moneycontrol, "I hope they get removed. They don't deserve to be on the board."

The Manipal-TPG consortium is one of the bidders to take control of Fortis and had earlier this week sweetened the offer by valuing Fortis at Rs 180 per share.

Who are these four directors and how did they end up on the board?

All four members of the current board have been associated with either the Fortis group, Religare group, or Ranbaxy for long tenures in the past. This has led to them being accused of working at the behest of erstwhile promoters of Fortis, Malvinder Singh and Shivinder Singh.

Singh brothers now hold around 0.77 percent stake in the company.

Harpal Singh (67), is the father-in-law of Fortis' erstwhile chairman Malvinder Singh, who is the mentor and chairman emeritus of Fortis Healthcare. Harpal Singh is also on the board of Fortis diagnostics' arm SRL.

Seventy-year-old Brian Tempest, a UK national, is associated with group companies of Singh brothers in both executive and non-executive roles for around two and a half decades.  He worked for Ranbaxy since 1995 holding the position of Managing Director and Chief Executive Officer until 2005. He was then Chief Mentor and Non-Executive Director on Ranbaxy board until 2008 when Ranbaxy was sold to Japanese drug maker Daiichi Sankyo.

Daichii subsequently sold Ranbaxy to Sun Pharma. Daiichi is trying to enforce Rs 3500 crore arbitration award against Singh brothers whom it accuses of concealing the extent of regulatory troubles at the company. Ranbaxy pleaded guilty and agreed to pay USD 500 million to US authorities to settle a criminal and civil lawsuit which levelled charges of falsifying data from its drug facilities and shoddy manufacturing practices against it.

Tejinder Shergill, a 73 retired army officer, was appointed as an additional director in March. Shergill is also associated with Singh brothers. Shergill was the director on Fortis' board between June 2005 and September 2013.
Later, he joined the board of group companies, SRL Limited in 2013, and SRL Diagnostics Private Limited in 2015 as an independent director.

Sabina Vaisoha (47), is a seasoned professional in the area of Media and PR.  She held board positions on companies promoted by the Singh brothers - Religare Enterprises and Religare Finvest.

The Fortis' board has vehemently denied any role or influence of the Singh brothers on their decisions regarding the bids.

An email sent to Fortis seeking comment on the removal of four directors and allegations of Singh brothers influencing the company's decisions remained unanswered at the time of publishing.