Fortis Healthcare reports loss for Sept, Dec quarters

PTI | | Updated on: Dec 06, 2021

External legal firm to probe siphoning of funds by promoters

Fortis Healthcare today reported a consolidated net loss of ₹19.10 crore for the quarter ended December 2017 against a profit of ₹453.29 crore in the year ago period.

The company also reported its September quarter net loss at ₹23.61 crore after it had sought a 15-day extension to declare earnings for the second and third quarter of the current financial year citing statutory auditors’ inability to complete the audit before the stipulated board meeting.

Although the company presented its earnings report, the auditor to Fortis Healthcare, Deloitte Haskins & Sells LLP, said it had not performed an audit. It said the interim results have been reviewed by other auditors whose report has been furnished to them by the management. “Because of significance of the matters... relating to the ongoing investigations... we were not able to obtain sufficient appropriate evidence to form a conclusion on the statement,” it added.

In an early morning regulatory filing, the company presented its earnings for the second and third quarter of the ongoing fiscal. Total income during the December quarter stood at ₹1,163.27 crore (₹1,192.31 crore).

For the quarter ended September 2017, income was reported at ₹1,234.25 crore. Meanwhile, shares of the company were trading flat at Rs 159.75 apiece on BSE.

Regulatory lapses

The results of Fortis Healthcare come amid controversy and scrutiny of the company’s finances over alleged regulatory lapses in transfer of funds to some promoter-linked firms.

Fortis Healthcare landed into trouble after a media report claiming that the company’s promoters, Malvinder Mohan Singh and Shivinder Mohan Singh, took at least $78 million (about Rs 500 crore at current exchange rate) out of the publicly-traded hospital company they control without board approval about a year ago.

The company said its wholly-owned arm Fortis Hospitals had deployed funds to the tune of ₹473 crore as secured short-term investments to group firms of its promoters. The move attracted regulatory scrutiny as SEBI began examining the issues following resignation of the two promoters from the board.

The company said the loans are adequately secured and repayment has since commenced as per agreed payment schedule.

The company’s statutory auditor said SEBI is conducting an investigation in respect of secured short-term investment of ₹473 crore made by the wholly-owned subsidiary of the parent, and pending completion of the investigation, it is unable to “conclude on effects, if any of the outcome of the same on the financial results, state of affairs, cash flows, and operations of the group”.

Financial impropriety

Fortis Healthcare said it will hire an external legal firm to carry out investigation into alleged siphoning of cash by the company's promoters, Malvinder Singh and Shivinder Singh.

The duo, who had last month resigned from the board of the company, are alleged to have taken Rs 473 crore out of the hospital company they control without board approval. The alleged financial impropriety happened about a year ago.

In its second and third quarter earnings statement, Fortis said its Audit and Risk Management Committee “decided to carry out an independent investigation through an external legal firm''.

“The scope of the investigation, inter alia, covers (a) inter corporate deposits (ICDs) given by a wholly owned subsidiary of the company; (b) intra-group and related party transactions, including compliance with applicable laws and regulations,” it said.

Fortis had previously stated that the company had loaned Rs 473 crore in the normal course of treasury operations to some entities, which later became part of the founders’ group due to a change in shareholding. The loans have since been recognised as related-party transactions and repayment has commenced.

The company said it had on February 16 received a letter from SEBI confirming that an investigation had been instituted by the market regulator in the matter.

SEBI had asked the company to furnish information and documents relating to the fund transfer. “The company has furnished some of the information and documents requested and has sought additional time for submitting the balance information as requested,” Fortis said.

Fortis said it has also received a notice from the Registrar of Companies seeking information on the same matter.

Published on March 01, 2018
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