SEBI issues notice to Fortis Healthcare subsidiary over diversion of funds

Our Bureau Mumbai | Updated on April 16, 2021

Former promoters Singh brothers allegedly siphoned-off ₹500 crore

Leading hospital chain Fortis Healthcare (FHL) disclosed on Friday that its subsidiary, Escorts Heart Institute and Research Center (EHIRCL), has received a notice for penalty proceedings from markets regulator SEBI in the matter involving diversion of funds.

Under scanner

FCL was under investigation for diverting more than ₹500 crore to its erstwhile promoters— Shivinder and Malvinder Singh. SEBI has been probing FHL since 2018 and a show-cause notice was issued to the firm and its wholly-owned subsidiary, Fortis Hospitals, last year.

It was alleged that in 2018, the former promoters of FHL took at least ₹500 crore out of the company and the statutory auditors had refused to sign on the company's second-quarter results until the funds were accounted for.

Promoters used loans

SEBI found that FHL, through Fortis Health Management, had granted loans to three Indian companies in the form of inter-corporate deposits.

Three borrower companies, entities connected to the promoters of FHL, were examined by a forensic auditor. FHL and other group companies issued a number of short-term loans for the benefit of former promoters where the loans were repaid by channelling the funds through various companies.

It was observed that the ultimate beneficiary of the loan given by the company was RHC Holdings, a company promoted by Singh brothers. A similar pattern was seen with loans to various other unrelated entities that benefited RHC holdings.

“SEBI has issued a notice under Rule 4 of (Procedure for holding inquiry and imposing penalties) Rules, 1995 read with Section 15-I of SEBI Act in the matter of Fortis Healthcare Limited to Escorts Heart Institute and Research Center Limited," Fortis said in a regulatory filing.

Ventures Pte Ltd, a wholly-owned subsidiary of IHH Healthcare Berhad, is now the promoter of Fortis. Shares of Fortis Healthcare closed 1.33 per cent lower at ₹203.40 on the BSE.

Published on April 16, 2021

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