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Malvinder Singh and Shivinder Singh are looking to divest management control in all their key businesses hospitals, non-banking finance business, health insurance and stock broking through multiple transactions that will raise around Rs 5,500 crore and enable the Singh brothers to tide over the cash crunch at the group level. They will retain significant minority stakes in most of these businesses and continue as investors in them, people familiar with the situation told ET.
“The brothers have decided to sell management control in Fortis Healthcare BSE 3.83 %, Religare Health Insurance and Religare Securities and eventually in Religare Enterprises BSE 1.26 %, the holding company for the non-banking finance business,” said a person aware of the development. “The group is expected to sign binding agreements separately for three transactions in the next two months.
The fourth one, divestment of Religare Enterprises, will take place either by March end or may spill over to the next quarter.” The Singh brothers hold a 63% stake in Fortis; around 80% of which is pledged with lenders. They hold 50.93% of Religare Enterprises, the financial services company, of which 86% is pledged. RHC Holding Pvt Ltd, the holding company for Fortis and Religare, had debt of Rs 4,700 crore on March 31, 2016. In addition, the Court of Arbitration in Singapore has instructed them to pay Rs 3,500 crore to Daiichi Sankyo as damages for not disclosing relevant information to the Japanese company during the sale of Ranbaxy LaboratoriesBSE 5.63 %. The Singh brothers are contesting this arbitration award in the Delhi High Court. “The entire proceeds from these transactions will be used to fuel the brownfield growth of the hospital network as also pay for the transaction with the business trust in the last quarter (besides) bolstering the net worth of the non-banking finance company (NBFC), which has had to take some write-offs due to bad loans in the recent past,” said the person cited above.
RELIGARE HEALTH INSURANCE
According to persons with knowledge of the situation, the Singh brothers are in discussions with two private equity firms India Value Fund (IVF) and Warburg Pincus — to sell up to 51% stake in the company with management control. Government guidelines allow for only 49% foreign direct investment (FDI) in the health insurance sector and, therefore, whether they sell 49% or 51% will depend on who the buyer is. The deal is expected to value the insurance business at Rs 1,400 crore. “IVF does not comment on market speculation,” said a spokesperson of the fund.
