GURUGRAM | MOHALI | MUMBAI | AHMEDABAD-GANDHINAGAR | RAJKOT - In a press-release submitted to the Indian Stock Exchanges, Mohali (Punjab) headquartered Indian healthcare company Fortis Healthcare Ltd said of having received suo moto notice of contempt from the Supreme Court of India in context to violation of previous court orders.
The press-release as submitted by the company to the Indian Bourses read that, with reference to the judgement of the Supreme Court of India (“Hon’ble Court”) dated November 15, 2019 in the matter of Vinay Prakash Singh v/s Sameer Gehlaut & Ors. (“Judgment”), the Hon’ble Court has issued a suo moto notice of contempt to Fortis Healthcare Limited (“Company” or “Fortis”) for violating the Court order dated December 14, 2018.
The statement further claimed that, the Company is currently evaluating the Judgement and exploring legal means to address it in an expeditious manner keeping in mind the best interest of all our stakeholders.
Separately, we have been advised that the open offer made by IHH Healthcare Berhad (“IHH”) to the public shareholders of Fortis for the acquisition of shareholding of up to 26% at a price of INR 170 per share continues to remain in abeyance and would be adjudicated upon in conjunction with the hearing of the contempt petition.
The Hon’ble Court has vide the notice sought an enquiry into consummation of the acquisition of healthcare assets from RHT Health Trust by the Company (“RHT Transaction”).
The Hon’ble Court has also sought an enquiry into whether the subscription by IHH to the shares of the Company (“IHH Transaction”) was undertaken after the status quo order was issued by the Hon’ble Court on December 14, 2018 and accordingly, if such subscription was in violation of this status quo order.
The Company would be appropriately responding to these concerns of the Hon’ble Court by providing cogent evidence.
The Company remains firm that these transactions were, at all times, conducted in a fair and transparent manner after obtaining all relevant regulatory, shareholder and corporate approvals and only after making all due disclosures to public shareholders of the Company and to the regulatory authorities, in a timely manner.
These transactions were always undertaken bearing in mind the best interests of the Company and its shareholders.
NO LINK WITH ERSTWHILE PROMOTERS
Fortis will take this occasion to present facts before the Hon’ble Court that demonstrate that no part of the proceeds from the IHH Transaction were paid to Mr. Malvinder Mohan Singh, Mr.Shivinder Mohan Singh or any of their controlled entities (“Erstwhile Promoters”) in anyway.
The Company would further place before the Hon’ble Court that none of the Erstwhile Promoters were in control of the Company at the time of the IHH Transaction or RHT Transaction and were not involved in the consummation of these transactions, in any way, manner or form.
The said transactions were undertaken/ consummated only after Erstwhile Promoters had ceased to exercise any control over the Company (by virtue of management rights, shareholding or otherwise) and their shareholding in the Company was reduced to a negligible level.
Specifically, the Erstwhile Promoters had resigned from the board of the Company on February 8, 2018 and by March 30, 2018, the combined shareholding of the Erstwhile Promoters had reduced to 0.77% pursuant to invocation of pledges by banks and financial institutions.
In fact, subsequent to the Erstwhile Promoters ceasing to have control over the Company, and in order to instil confidence into the Fortis group and bring in more transparency, at the behest of the institutional shareholders, an entirely new board of independent directors, having no connection at all to the Erstwhile Promoters, were appointed in April 2018, following feedback from minority shareholders - with the directors associated with the Erstwhile Promoters being either removed or having resigned.
The appointment of the new board of independent directors was approved by more than 99% of the shareholders present and voting (includes e-voting) in the Extraordinary General Meeting of the Company held on May 22, 2018.
At the time of appointment of the new board of independent directors mentioned above, the Erstwhile Promoters held a meagre 0.74% stake in the Company.
The reconstituted board has since then proceeded to resuscitate the operations of the Company, and has filed civil suits against the Erstwhile Promoters for recovery of Company’s money, and the newly appointed board of independent directors had worked to ensure de-linkage in respect of prior related party transactions, and has made full disclosures in the accounts about their actions in this regard, while also cooperating with the Securities Exchange Board of India (SEBI) in their probe as well as with Serious Fraud Investigation Office (SFIO) and other regulatory authorities in order to hold the Erstwhile Promoters accountable.
IHH TRANSACTION
It would also be presented before the Hon’ble Court that the IHH Transaction was done through fresh preferential allotment of shares of the company and due approvals were sought for the same through an Extraordinary General Meeting of shareholders held on August 13, 2018.
It is pertinent to highlight that the selection of IHH, which was announced on July 13,2018, was done in a fair and transparent manner with a due bidding process being run by the Board with the assistance of independent financial advisors and legal advisors and with all necessary disclosures as required.
The rationale to select IHH over others was because of the most appropriate size of capital infusion as well as nature of the bid to directly put money into the Company.
The preferential allotment was undertaken in a highly fair and transparent manner with the subscription price of INR 170 being at a approx. 20% premium to market price when the transaction was announced on July 13, 2018.
The IHH Transaction was consummated on Nov 13, 2018 which was more than a month before the status quo order was passed by the Hon’ble Court, and the same would be adduced before the Hon’ble Court during the contempt proceedings.
It would also be represented that the IHH Transaction was consummated post receipt of all approvals including those as by SEBI, the Competition Commission of India as well as the Fortis shareholders (who voted in favour of the transaction by a resounding majority of over 99% of the shareholders present and voting (includes e-voting)).
At no point did IHH acquire any shareholding in the company from any market participant including the Erstwhile Promoters.
The preferential allotment provided IHH with approx. 31% shareholding in the Company along with a right to appoint majority directors on the board of the Company, as a consequence of which the open offer was triggered.
IHH nominees were also brought on the board of the Company along with the existing independent directors pursuant to the share subscription transaction.
Separately, the RHT Transaction which was consummated on January 15, 2019, was also undertaken in the best interest of the company.
As a result of this, Fortis bought back hospital properties worth approximately INR 4,666 Crore by acquiring securities in the RHT Trust’s Indian entities that had ownership of these properties.
The consummation of the transaction was value accretive for the Company and its shareholders as it saved significant clinical establishment fees that Fortis was paying to RHT for the utilization of such assets, and accordingly resulted in an annual saving of approximately INR 270 Cr for the Company.
This has significantly enhanced the profitability of the Company and is key to the recovery of the Company from its previous distressed situation.
The same is apparent from the Q4 FY19 results that the Company released.
The urgency in undertaking this transaction stemmed from immediate need to repair the deeply stressed balance sheet, which would have led to insolvency and damage to all stakeholders; i.e. shareholders, employees and public at large.
All requisite approvals including regulatory approvals were obtained for the transaction.
In fact, the RHT Transaction was approved by an overwhelming majority of over 99% votes in favour by Fortis shareholders present and voting (includes e-voting), with appropriate disclosures statutory or otherwise being made as required.
Further, it must be noted that at the time of consummation of the RHT Transaction, to the best of the Company’s knowledge the Erstwhile Promoters or any of their controlled entities were not unitholders in the RHT Health Trust.
Further, and as mentioned above, at that time the Erstwhile Promoters were completely de-linked from the Company in terms of the Board or operations or management and held a miniscule 0.16% stake in the Company.
The Company has been on the mend thanks to the efforts of the newly appointed directors - both nominees and the independent directors - and is finally returning to its mission of delivering quality healthcare to patients across the country.
As we continue to work tirelessly to further the interest of all stakeholders and provide the best healthcare services to the country, we look forward to bringing out these facts and present it for a favorable and just decision for the Company and its stakeholders.
The Company would like to re-iterate its utmost faith in the Indian judicial system and reposes its complete faith in the Hon’ble Court.
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