Case Folio
Corporate Governance Issues at Fortis Healthcare-Religare Enterprises Group

Article Details
Pub. Date : Dec' 2020
Product Name : The IUP Journal of Case Folio
Product Type : Article
Product Code : IJCF21220
Author Name : S Subramanian
Availability : YES
Subject/Domain : Management
Download Format : PDF Format
No. of Pages : 28



The corporate fraud committed by brothers Malvinder Mohan Singh and Shivinder Mohan Singh created lots of uncertainty for Fortis Healthcare Ltd. and Religare Enterprises Ltd., although both promoters have quit the firms and relinquished control. The governance issues in Fortis-Religare group, earlier known as Ranbaxy group, started way back in 2008 when the promoters had sold their flagship company Ranbaxy Laboratories Ltd. to Daiichi Sankyo of Japan. Since then, the Singh brothers had expanded the business of both the other listed companies, Fortis Healthcare Ltd. and Religare Enterprises Ltd. Later it was found that Ranbaxy Labs was sold hiding information about the probes it was facing with the US FDA. Daiichi ended up paying a hefty fine to FDA for Ranbaxy and later selling it to Sun Pharmaceuticals. Daiichi also sued Singh Brothers and was awarded $350 mn damages in 2016. In 2017-18, the Singh brothers faced allegations that they had diverted funds from Fortis and Religare also, to the family-controlled holding companies. In parallel, their shareholding in Fortis and Religare had come down due to the loans they had taken. In February 2018, the Singh brothers exited both the companies and new managements were installed. The external shareholders of both Fortis Healthcare and Religare Enterprises faced wealth destruction due to fraudulent transactions. Given the fraud cases faced by the Singh brothers, both Fortis Healthcare and Religare Enterprises faced uncertain futures.


On January 11, 2020, the Indian Enforcement Directorate filed a charge sheet against Malvinder Mohan Singh and Shivinder Mohan Singh, well-known businessmen, on a money laundering case during their tenure at Religare Enterprises Ltd. The management of Religare Enterprises issued a formal statement welcoming the development (Ohri, 2020a and 2020b). Still, both the investors and management of the company were aware of the uncertainty surrounding the firm's future due to the cases involving the Singh brothers.

Similar was the uncertainty surrounding Fortis Healthcare Ltd. as well, the erstwhile sister firm of Religare Enterprises. Almost two months earlier, on November 17, 2019, Fortis Healthcare drew flak from the Indian Supreme Court for paying 46.66 bn to buy back hospital assets from Religare Health Trust (RHT) of Singapore. The court observed that it was a violation of its previous order in the Singh brothers case. The court warning was a sign of uncertainty over the plans that IHH, the new promoter, lined out for Fortis Healthcare.