Mumbai-based proxy advisory firm Institutional Investor Advisory Services (IiAS) Tuesday said that the board of Fortis Healthcare Ltd may face an Indian class-action suit if shareholders’ interest is not protected.
The IiAS report referred to the notice by institutional investors Jupiter Asset Management and East Bridge Group calling for an extra-ordinary general meeting (EGM) of the company to remove four board members and appoint three new independent directors.
The investors called for the removal of board members Brian Tempest, Harpal Singh, Sabina Vaisoha and Tejinder Singh Shergill.
Brian Tempest was the former managing director and chief executive officer of Ranbaxy Laboratories. He has been a non-executive independent director of Fortis Healthcare since August 2011.
The report also said that the current board should refrain from making decisions for Fortis until shareholders have voted on the resolutions to overhaul the current board in the EGM called by its 12.04% shareholders.
Earlier this month, The Economic Times had reported that ace investor Rakesh Jhunjhunwala had questioned the decisions taken by the Fortis board, given that it had been elected by the former promoters of the company.
The IiAS report has also raised questions over the appointments of former PricewaterhouseCoopers (PwC) executives Rohit Bhasin and Deepak Kapoor, as an additional director (independent) and the head of the expert advisory committee, respectively, given that PwC had been the auditors of Religare group companies (part of the same group) for a long time.
The board’s decision to rope in Standard Chartered Bank to assist the expert advisory committee and the board on the sale was also a subject of scrutiny.
The report said Standard Chartered had been a large investor in Fortis with a 3.05% stake through its private equity arm as on 31 March 2017.
The proxy advisory firm believes the board should run a process that allows all potential bidders to bid within a tight time-line.
Administering a selling process that limits the full discovery of price, leaves investors worried that they are being short-changed, the report said.
Fortis Healthcare has so far attracted bids from five suitors. Radiant Life Care, a hospital chain backed by private equity firm KKR & Co., is the latest bidder to join the race. The other four bidders are TPG-backed Manipal Health, Malaysia’s IHH Healthcare, China’s Fosun and a consortium of Hero Enterprise Investment Office and Burman Family Office.
The company has received binding offers only from TPG-backed Manipal Health, IHH Healthcare and a consortium of Hero Enterprise Investment Office and the Burman Family Office.
The report said that by allowing the expert advisory committee to decide only on the binding offers, the board has already cut its wings.