SC Limits Singh Bros’ Abilty to Sell Fortis Stake
STAY ORDER Singhs told to maintain status quo on shares held by Fortis Health Holding in the hospital chain following Daiichi plea
New Delhi: In a potential setback for the cash strapped promoters of Fortis Healthcare — Malvinder and Shivinder Singh, the Supreme Court has told the brothers to maintain the current status of shares held by one of their companies in Fortis Healthcare.
The order, a result of Daiichi Sankyo’s latest petition at the apex court, might block the brothers from selling any shares in their flagship hospital chain until arguments are heard likely after four weeks.
A lawyer for the Singhs said the order does not affect other sales of shares of the hospital group, including those to pare debt, as it only applies to one particular company — Fortis Healthcare Holding. This company held 42.86% stake in Fortis Healthcare as of the end of the June quarter, down from 52.20% at the end of the March quarter, according to the Bombay Stock Exchange (BSE). The Supreme Court on Friday issued notice to RHC Holding and Oscar Investment, companies controlled by the Singhs that together own Fortis Holding. RHC and Oscar are expected to submit a reply to Daiichi’s petition before the next date of hearing, which has not been finalised.
“Issue notice, returnable in four weeks. In the interim, it is directed that status quo as on today with regard to the shareholding of Fortis Healthcare Holding in Fortis Healthcare shall be maintained,” the bench stated.
Shares of Fortis Healthcare dropped 2.44% intra day at the BSE after the court’s order was passed. The stock closed at ₹ 151.70, 0.13% lower from the previous close, while the benchmark Sensex ended 1.01% lower.
“As the matter is sub-judice, we cannot comment,” a spokesperson for RHC Holdings told ET.
“Fortis Healthcare Holding cannot for four weeks change the status of the shares they hold in Fortis Healthcare as of today,” Anuradha Dutt, counsel for the Singhs, told ET. “This order only concerns Fortis Healthcare Holding and has nothing to do with any other shares (including those of foreign investors) in Fortis Healthcare.”
On the other hand, Daiichi’s co- unsel told ET that the Supreme Court’s latest order “clearly” prevents any stake sales or dilutions by Fortis Holding. The firm also expects the move to impact the Singhs’ decision to increase the shareholding limit for foreign investors in the hospital chain to 74% from 24% — a move that was approved by the Reserve Bank of India in July. “The induction of foreign investor in Fortis Healthcare will lead to change in status quo of the shareholding in Fortis Healthcare and will be in violation of supreme court's order,” the counsel told ET.
The Singhs are currently locked in litigation initiated by Daiichi, which is trying to enforce an arbitration award that would require the brothers to pay the company ₹ 3,500 crore in damages and interest. A Singapore tribunal had granted this award last year after Daiichi alleged the Singhs concealed information of wrongdoing at Ranbaxy while selling it for $4.6 billion in 2008.
Since June, Fortis Healthcare Holdings has pared its shareholding in the Fortis hospital chain to around 37% from 52.20%, Daiichi's counsel had alleged at the Delhi High Court on Thursday. The share sale has reportedly been to raise cash to pay off the high cost debt. Daiichi alleged that these sales violated court orders to maintain the value of the Singhs’ unpledged assets and fears the move would make it difficult to realise the award if it wins the case.