New skeletons tumble out of Fortis cupboard

FRESH TWIST Due diligence turns up unpaid bills, some lenders weigh NCLT

MUMBAI:The due diligence of Fortis Healthcare Ltd has unearthed unpaid vendors’ bills of ₹450 crore, a ₹503 crore penalty on its subsidiary Fortis Escorts Heart Institute and undisclosed landrelated issues at three of its hospitals, three people aware of the matter said.

All of them spoke on condition of anonymity.

The four suitors for Fortis Healthcare are the Hero Enterprise Investment Office-Burman Family Office (Dabur) consortium; IHH Healthcare Bhd; Radiant Life Care backed by US private equity firm KKR; and the Manipal-TPG consortium. They will complete due diligence by June 10 and make fresh offers by June 14.

Separately, some of Fortis’s creditors are also thinking of recovering their dues of ₹2,500 crore by taking the troubled company to the bankruptcy court, said one of the three people cited above.

The developments could cast a shadow on Fortis’s valuation, which was pegged earlier by TPG-Manipal at ₹180 per share.

“Due diligence may pull down the valuation. Also, the company’s performance has deteriorated. There are some land-related issues with the Gurgaon hospital, apart from similar issues at hospitals in Malad and Vashi (Both in Mumbai). I do not expect the fresh bidding to be too high,” said the second of the three people mentioned above, a contender for Fortis’s assets.

Fortis’s suitors have 10 days to complete financial and legal due diligence, after which they can submit bids by June 14. The winner must invest at least ₹1,500 crore in the company through a preferential allotment, apart from formulating plans to fund the acquisition of RHT Health Trust and facilitating exits for private equity investors.

Fortis’s subsidiary Fortis Escorts Heart Institute was directed by a special committee on May 29 to pay ₹503.36 crore to the Directorate General of Health Services within a month on charges that it was making unreasonable profits.

“They have got some relief here, and it has been pushed till December, but whoever gets to

buy Fortis will have to pay the fine,” the second person cited above said.

A Fortis spokesperson said in an email: “In the normal course of business, there are vendor payments due at any point in time with some delays. These are cleared as soon as possible in an appropriate manner. Also, we are not aware about any creditor/s moving to NCLT to recover their dues.”

The Delhi high court has stayed the DGHS order to recover over ₹500 crore from Escort Heart Institute and asked Fortis to deposit ₹5 crore within 3 weeks with a directive that no coercive action be taken against it till the next hearing, the spokesperson added. Forbes