Singh brothers restructure Fortis, Religare as they wrestle with debt

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Mumbai: Two companies controlled by tycoons Malvinder and Shivinder Singh announced a reorganization as the brothers wrestle with debt and legal tangles.

The Singh brothers’ Religare Enterprises Ltd announced a shakeup late on Tuesday, with Malvinder Singh stepping down as non-executive chairman of the financial services and small-business lender while four other officials also resigned.

Separately, another Singh holding, Fortis Healthcare Ltd, offered to buy the assets of its Singapore-listed RHT Health Trust as part of a broader reorganization for Fortis, India’s second-largest private hospital chain by market value.

The upheaval comes as the Singhs have been attempting to sell assets in order to pare down debt at their main holding company RHC Holding Pvt. Ltd, people familiar with the situation told Bloomberg in March.

The Reserve Bank of India (RBI) raised concerns over the creditworthiness of some customers of a Religare finance unit, according to a report by the company’s auditor PricewaterhouseCoopers Llp in June. Since August, India’s top court has ordered the Singhs not to sell or dilute their shareholding in Fortis.

“The brothers are trying to restructure their group and group companies including Fortis Healthcare to cool off investor concerns and settle issues,” said Arun Kejriwal, founder of Kejriwal Research & Investment Services Pvt. Ltd “This is a last-ditch effort to save the group by exiting from positions and consolidation.”

A Religare spokesman said the two announcements aren’t related, while a Fortis spokesman declined to comment. An RHC spokesman declined to comment on the restructuring at Religare and Fortis beyond the companies’ statements, as well as ongoing legal challenges, the firm’s debt and debt rating.

Fortis is offering to buy RHT Health for an enterprise value of Rs4,650 crore ($711 million). The transaction, which includes Rs1,152 crore of debt, would lead to improved profitability with service fees being eliminated as the hospital company integrates all the assets into its fold, Fortis said in its statement.In addition to Malvinder Singh resigning at Religare, its chief executive officer (CEO) and chief financial officer (CFO) quit, as well as the company secretary and a board member. Religare said it appointed S. Lakshminarayanan as chairman, effective 14 November, and also named Krishnan Subramanian as new CFO. Malvinder Singh will remain on the board. Religare’s board approved plans to raise capital and said it will review strategic options including partnerships. The company also reported a narrower loss for the second quarter.

Shares of Religare soared 10% in Mumbai trading on Wednesday. The stock is down 82% for the year. Fortis shares jumped 12%, trimming their year-to-date loss to 22%.

India’s top court in August ordered the Singh brothers to halt any dilution in their shareholdings of Fortis as it considers a petition by Japanese drug firm Daiichi Sankyo Co. to place a longer-term halt on asset sales by the brothers. Daiichi is seeking to enforce an award of about $500 million in damages and interest ordered by a tribunal in Singapore over the Singh brothers’ 2008 sale of their stake in Ranbaxy Laboratories Ltd. The Singh brothers are appealing that ruling.

The rating on main holding firm RHC’s long-term non-convertible debt was downgraded to “default” by India Ratings & Research in July. The rating was assigned after RHC missed scheduled coupon payments on its non-convertible debentures the previous month and reflects the group’s impaired ability to service debt, according to the agency. In September, the agency changed RHC’s rating to that of a “non-cooperating category” after the firm did not provide a no-default statement for the previous month despite multiple requests.