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NEW DELHI: Malvinder Mohan Singh and Shivinder Mohan Singh have resigned from the board of Religare Enterprises less than a week after they stepped down from the board of Fortis Healthcare Limited. With this, they will not be on the board of any listed company.
“After the adverse High Court award on the Daicchi Sankyo case and since their shareholding has come down significantly, the promoters have stepped down from the board of the company to protect the interest of the company and stakeholders,” said a Religare spokesperson.
The company, which is under scrutiny for fund diversion as well as large NPAs, blamed former chairman and managing director Sunil Godhwani for its woes. “The company is in the present situation due to the legacy issues of previous management led by Mr Sunil Godhwani. The serious mismanagement under his leadership drew the attention and intervention of the regulators. The situation forced the Singh brothers to come on to the board of Religare. While the board initiated corrected actions by selling business to get capital into the company, Daiichi Sankyo hindered the process of sale,” said the spokesperson.
Three to four directors, representing private equity firms and institutional investors, are likely to join the board of the troubled financial services company by this weekend or early next week. This includes Sidharth Mehta, the founder of Bay Capital that owns about 10% stake in the company as well of a nominee of International Finance Corporation (IFC)?, which has a 7 % stake.
Private equity firms and institutional investors are set to invest about Rs 1,000 crore in the company, through a preferential issue., said two people familiar with the development. The Singh brothers held a 13% stake in Relligare on December 31 2017, as per the shareholding pattern disclosed to the stock exchanges by the company. Their shareholding has subsequently fallen to less than 5 % and after the Rs 1,000 crore fund infusion, it will further come down to half of its current level. The current market capitalisation of Religare is Rs 980 crore.
“Facing acute cash crunch in their holding company, the Singh Brothers had pledged their most of the shareholding in Religare. The lenders have invoked the pledges and sold their shares. This has resulted in the shareholding of the promoters falling to a low single digit,” a senior official with one of the lenders said.
The Singh brothers are fighting several fires simultaneously. Religare is under scrutiny from regulators for fund diversion and large non-performing assets. The RBI has raised issue of diversion of funds from Religare Finvest, the non-banking finance arm of Religare Enterprises. New York based private equity firm, Sigular Gruff and Co, has accused the brothers of ‘siphoning’ money out of Religare to help manage their personal debts.
A Bloomberg report last week, quoting unnamed sources, alleged that the Singhs took atleast Rs 500 crore out of Fortis Health Care without board approval. Deloitte, the auditor of the company is believed to have refused the sign off on the company’s quarterly results until the funds are returned. The company has so far not announced its second quarter and third quarter results and has said they would be approved at its board meeting on February 28.
The Delhi High Court recently allowed Japanese drug maker Daicchi Sankyo to enforce an international arbitration award to recover Rs 3500 crore from the Singh brothers. A Singapore tribunal had said that the brothers needed to pay the money for concealing information relating to wrongdoing at Ranbaxy, when they sold the company to the Japanese drug maker in 2008. The Singhs have appealed against the order in the Supreme Court.
Religare board is is expected to revisit the transactions that the company has announced in the past. These include the divestment of its health insurance business – Religare Health Insurance to a consortium led by True North, a home grown private equity firm, for about Rs 1,300 crore and the the sale of its securities arm to Edelweiss group.