A new chapter is set to be scripted in the battle to acquire Fortis Healthcare, India’s second-largest hospital chain, with three of its directors stepping down ahead of an extraordinary general meeting (EGM) today to decide on their continuance.

Their departure may well lead to a fresh round of bidding for the chain, with YES Bank, the largest shareholder, said to have indicated to the Board that it wanted all the bids reviewed. Indeed, the Mumbai-based private lender is even reported to have asked the Board to invite bids from entities that had not made any submissions earlier.

Separately, YES Bank has itself come in for scrutiny from market regulator SEBI for failing to make a timely disclosure of its February takeover of shares pledged by Fortis’ promoters.

In stock exchange filings on Sunday and Monday, Fortis stated that independent directors Tejinder Singh Gill, Sabina Vaisoha and non-executive director Harpal Singh have resigned. In April, institutional investors East Bridge Capital and Jupiter India Fund had called for the removal of all three and Brian Tempest, another director, for alleged failures in corporate governance. The company had summoned shareholders to an EGM on May 22 (today) to decide the issue.

All the four directors were appointees of Fortis’ erstwhile promoters, siblings Malvinder and Shivinder Singh, and were perceived to be loyal to them. Harpal Singh is the father-in-law of Malvinder Singh, while Brian Tempest is a former CEO of Ranbaxy, which was promoted by the Singh family before being sold to Japan’s Daiichi Sankyo. Earlier this month, the four directors had written to the company’s stakeholders arguing against their removal and justifying their decisions.

On May 11, the Fortis Board voted 5-3 in favour of a bid by the Munjal-Burman family combine for Fortis, rejecting binding offers by a Manipal Hospitals-TPG combine, Malaysia’s IHH Healthcare, the KKR-backed Radiant Life Care and a non-binding offer from China’s Fosun International.

Since the Board’s decision, both Manipal-TPG and IHH Healthcare have revised their bids, offering significantly more than the Munjal-Burman combine’s winning bid. With YES Bank, the largest shareholder — it currently has a 15.21 per cent stake in Fortis — reportedly indicating that it wants investors to get the maximum value, it appears the battle for Fortis is set to begin anew.

YES Bank in trouble

Meanwhile, in another twist, YES Bank has itself run afoul of Securities and Exchange Board of India for having failed to disclose in a timely manner its takeover of the pledged shares of the Singh brothers in Fortis and subsequently selling a 2 per cent stake.

YES Bank acquired 90 million shares — a 17.31 per cent stake — of FHL on February 16 by acquiring shares pledged by Shivinder and Malvinder Singh after the promoters defaulted on loans provided by the lender. It then sold 11.2 million shares in the open market between February 23 and March 15. But the bank disclosed its invocation of the pledged shares to SEBI only on March 13. This, say experts, is against the regulator’s Substantial Acquisition of Shares and Takeovers (SAST) Regulations.

Clause 29 of the SAST regulations requires an entity to disclose a takeover of a pledged stake within two days. Sans this disclosure, the entity could benefit while selling the shares, say the experts. Usually, when a lender invokes pledged shares in a company, the scrip tends to see some volatility in its price because of investor interest.

Responding to an email query, a spokesperson for YES Bank said: “As a policy, YES Bank does not comment on company specific information.”

SEBI did not respond to an email query on the issue.

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