HC order weighs on confidence: Fortis investors

NEW DELHI: Domestic and foreign institutional investors of Fortis Healthcare (Fortis) have expressed concern that the Delhi High Court's order, seeking a forensic audit of transactions involving its former promoters Malvinder and Shivinder Mohan Singh, has created a reputational overhang and weighs on investor confidence.The Aug 31 high court order came in a case arising from Japanese firm Daiichi Sankyo's efforts to enforce its arbitral award against the erstwhile Fortis promoters. Last week, Fortis filed a special leave petition (SLP) in SC, challenging the order.Together, domestic and foreign institutional investors hold 57% shareholding, while retail share is over 11% in the company. "The question for the market is whether a transaction that has cleared the entire approval architecture - board, shareholders, CCI, Sebi, the takeover code, ever becomes settled'', Shriram Subramanian MD and founder of InGovern, a proxy advisory firm, told TOI.In 2018, Malaysia's IHH Healthcare acquired a controlling 31.1% stake in Fortis for approximately Rs 4,000 crore. "Questioning a transaction long cleared by all regulators and seeking its forensic audit after nearly a decade, will open a can of worms,'' he added.IHH is a credible strategic investor, and Fortis, after years of promoter-related turmoil and uncertainty, is now on a more stable footing, investors feel, and prolonged legal proceedings could create uncertainty. While the court has made clear that the forensic audit is a fact-finding exercise and does not, by itself, impose liability, investors said the process could still have wider implications for the company."Capital is mobile and investors have alternatives; prolonged uncertainty can therefore have consequences for the company and its shareholders,'' InGovern said in a note.The acquisition was approved by the board, cleared by the CCI, and completed under the Sebi takeover regulations through an open offer that market regulator itself permitted. Neither IHH nor Fortis was a party to the arbitration, the award or the execution proceedings.Get the latest Business News and Live updates. Download the TOI app.