New skeletons tumble out of Fortis cupboard
FRESH TROUBLE Firm’s due diligence unearths hundreds of crores of liabilities MUMBAI:The
due diligence of Fortis Healthcare Ltd has unearthed unpaid vendors’ bills of ₹450 crore, a ₹503 crore penalty on its subsidiary Escort Heart Institute & Research Centre Ltd, and undisclosed fines at three of its hospitals, xx people aware of the matter said.
The four suitors for Fortis Healthcare are Hero Enterprise Investment Office-Burman Family Office (Dabur) consortium; IHH Healthcare Berhad; 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, a person aware of the matter said. The developments could cast a shadow on Fortis’s valuation, which was pegged earlier at ₹180 per share, the people cited above said.
“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 first person, one of the suitors, requesting not to be named.
Fortis’s suitors have 10 days for 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. The Fortis board was reconstituted on xx date, and is now led by chairman Ravi Rajagopal. “The real story of Fortis is that they are today crumbling,” said a second person aware of the mater, who also did not want to be named. “It is like a house of cards which is collapsing. One, they do not have money to pay for salaries. I can understand doctors not getting paid, but when support staff gets stretched, that is where the pain begins to feel.”
“There are creditors who are overstretched. These are the guys who supply essential consumables to hospitals. If you see the creditors’ due in the balance sheet, it is ₹450 crore. Second, their credit rating is on a decline. Fresh borrowing is very difficult and more prohibitively expensive,” the second person added.
Besides, its subsidiary Escort Heart Institute in Delhi was directed to deposit ₹503.36 crore to the Director General of Health Services within a month on account of unwarranted profit 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 first person cited above said.