Fortis releases audited Q4 and FY18 results, auditor raises red flags

Fortis Healthcare | Aberdeen Standard Investments (Asia) Ltd increased stake in company to 5.02 percent from 4.96 percent earlier via open market purchases.

Fortis Healthcare on Saturday released audited results for Q4 and FY18, largely in line with the unaudited financials it announced on June 27.

The company said the audited financial statements have been released on the completion of the additional review of certain internal processes which were being undertaken at the request of the board of directors.

The release of audited accounts will hasten the process of company's sale. The last date for submission of bids ended early this week.

"As expected, there has been no change in the figures reported in the audited financial statements compared to the unaudited results announced," the company said in a statement.

"Our focus in the future will be in strengthening governance and transparency and restoring the health of the business. We are also currently in the process of evaluating the bids received on July 3, 2018 and will present our recommendation to the shareholders in the coming days.” said Ravi Rajagopal, chairman of the Fortis' board of directors.

Also read: Delay in declaring audited numbers, Singh bros' claim on brands spook Fortis bidders

The beleaguered healthcare provider, as per the audited financial statement, reported a loss of Rs 932 crore for the fourth quarter ended March impacted by continuing business challenges, impairments and provisions.

The company posted a net loss of Rs 68 crore during the same quarter of thr previous year. Revenues from operations or total income declined 4.69 percent to Rs 1,105.09 crore in Q4FY18, compared to last year's Rs 1,159.5 crore.

Provisions in Q4 FY18 were related to certain amounts totaling to around Rs 580 crore due to the company, the recoverability of which is doubtful.

Fortis erstwhile promoters have taken out Rs 494.14 crore through questionable corporate deposits.

For the full year ended March 2018, Fortis posted loss of Rs 1,009.23 crore versus a profit of Rs 421.7 crore in previous year. Revenues declined 0.28 percent to Rs 4,573.7 crore in the same period.

The statutory auditor Deloitte, while expressing "basis for qualified opinion", raised several flags.

The auditor said the consolidated numbers may get impacted due to both internal and external regulatory investigations. Legal firm Luthra and Luthra, in its internal investigation report, identified certain systemic lapses and override of controls under previous promoters.

"We are unable to comment on the regulatory non-compliances, if any, and the adjustments or disclosures which may become necessary as a result of further findings on the ongoing or future regulatory/internal investigations as the consequential impact, if any on these consolidated annual results," the auditor said in the statement.

The auditor also expressed inability to comment on erstwhile promoters Singh brothers claiming the ownership of the Fortis brands and seeking payments worth hundreds of crore rupees for using the brands.

"Since the matter is subjudice, the outcome of which is not determinable at this stage, we are unable to comment on the consequential impact," the auditor added.

The independent auditor also expressed apprehension about additional related parties who relationship may not have been disclosed to the company and, hence, not known to the management.

The auditor expressed inability to comment on the tenability of the refund claims by Fortis with regards to terminating the 'Letter of Appointment' of former executive vice-chairman Malvinder Singh. Fortis said it is trying to recover Rs 20 crore from Singh for breaching the limit of section 197 of the Companies Act, 2013.

The auditor also said the group's operations during the year continued to generate positive cash flows from operations and the management believes that the events stated above do not impact the entity's ability to continue as a going concerns basis due to the following.

In June 2018, Fortis secured a new line of credit aggregating to Rs 125 crore. Further, the company said it is in the process of securing additional line of credit of Rs 340 crore.

"The group has access to unencumbered assets that can be offered as security for any additional funding requirements in the future," the company said.

Subsequent to the year end in May 2018, the company has sold 18.2 million units of RHT Health Trust, as associated of the Company for a consideration of 13.65 million Singapore dollars.