Financial Daily from THE HINDU group of publications
Saturday, Aug 02, 2003
Medical Institutions & Hospitals
Corporate - Corporate Disputes
Healthcare biz Nandas spat continues
New Delhi , Aug 1
WILL the fault lines developing in the corporate structure of Escorts Ltd change the character of operations of the institute that is at the heart of the imbroglio?
The process of "corporatisation'' of the Escorts Heart Institute and Research Centre Ltd (EHIRC) - promoted by the Nanda family in 1983-84 as a charitable society - had commenced in 2000, when it was converted into a company.
However, the recent fissures that have developed between Mr Rajan Nanda and his younger brother, Mr Anil Nanda, seem to be centred around the future course of the healthcare business.
The genesis of the rift over the healthcare business dates back to June 2003, when the Escorts board decided to divest 17.1 per cent of its 80 per cent equity in EHIRC.
Mr Rajan Nanda (through investment companies) and Dr Naresh Trehan each hold 10 per cent equity in it.
While the ostensible reason for the company's decision was to bring a strategic investor, Merlion India Fund, on board to generate funds for expansion, Mr Anil Nanda, Vice-Chairman and Managing Director, Escorts Ltd, fears that the institution will lose its "charitable" character and "should be reverted to the original status of being a charitable institution."
Further, he is of the opinion that divestment allows access to the corpus of Rs 100-odd crore of EHIRC's tax-exempted reserves for an investment of Rs 2 crore by the company, according to his spokesperson.
The spokesperson added that the June board meeting was merely to hold a presentation on EHIRC's restructuring, with a decision on divestment to be taken at a later date.
"No resolution was passed with regard to disinvestment of equity at the June meeting. But on cross-checking with the company secretary, it was learnt, close to a month later, that in fact a decision on divestment had been taken. Hence the letter of dissent, circulated at the July 29 board meet," the spokesperson said.
However, Mr Rajan Nanda's camp differs. The Escorts spokesperson told Business Line that the decision on divestment in EHIRC was passed unanimously by the board.
"Even after sale of a minority stake to Merlion, Escorts will own over 60 per cent in EHIRC," the official said.
Supporting the proposed divestment, he added: "Merlion is owned by StanChart and Singapore-based Temasek Holdings, which has interests in life sciences. Escorts could benefit from Temasek's expertise in the healthcare arena."
Meanwhile, Mr Anil Nanda fears that Merlion may be seeking a larger pie to increase its stake to 26 per cent in EHIRC and this could possibly be achieved if either Mr Rajan Nanda or Dr Trehan further divest their stake, Mr Anil Nanda's spokesperson said.
On why he was reacting after three years since corporatisation of the entity, he said: "Mistakes have been made and the present efforts were to reverse the corporatisation of EHIRC."
However, market sources said that Mr Anil Nanda is not a member of EHIRC's board and has not been involved with the working of the company.
He has circulated his letter of dissent, backed with legal opinions, to other board members.
"He is expecting a change of heart of the board," said the spokesperson, in the absence of which he may have to resort to legal recourse.
Industry analysts said that the current developments over healthcare could have a throwback to events in the company in January 2003, when the board decided to give Mr Anil Nanda control over Goetze India Ltd, an auto ancilliary company.
Significantly, in that meeting, the board had also decided in favour of Mr Anil Nanda resigning from a few group companies and not seeking reappointment in them, industry officials said.
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