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The rise and fall of Singh brothers’ business empire
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Former Fortis Healthcare promoter Shivinder Singh said Tuesday that he has moved the National Company Law Tribunal (NCLT) against elder brother Malvinder and ex-Religare chief Sunil Godhwani, while dissociating from his sibling as business partner. Shivinder also alleged that collective and ongoing actions of his elder brother and Godhwani led to a systemic undermining of …
Continue reading “The rise and fall of Singh brothers’ business empire”
Former Fortis Healthcare promoter Shivinder Singh said Tuesday that he has moved the National Company Law Tribunal (NCLT) against elder brother Malvinder and ex-Religare chief Sunil Godhwani, while dissociating from his sibling as business partner.
Shivinder also alleged that collective and ongoing actions of his elder brother and Godhwani led to a systemic undermining of the interests of companies and their shareholders.
The Poster Boy of India’s Pharmaceutical Industry
New Delhi-based Ranbaxy Laboratories Ltd, which was once the poster boy of India’s pharmaceutical industry, was founded way back in 1937 by Ranbir Singh and Gurbax Singh as a distributor for a Japanese company, Shionogi.
The name Ranbaxy also came from the names of the founders – (Ran)bir and Gur(bax). However, in 1952, they sold the business to their cousin, Bhai Mohan Singh and within few years, his son Parvinder Singh took charge of the company.
Under the leadership of Parvinder Singh, Ranbaxy saw an increase in scale. In the late 1990s, Ranbaxy formed a US subsidiary to enter the pharmaceutical market in the US.
In 1999, upon the death of Parvinder Singh, his sons, Shivinder and Malvinder, inherited their family’s stake in Ranbaxy.
The Singh brothers started diversifying the business aggressively and founded hospital chain, Fortis Healthcare in 2001. They also started expanding their financial services business – Religare Enterprises.
Religare was founded in 1982 as a stock brokerage firm, but the brothers expanded the business and branched out into financing, insurance, wealth management etc.
The Singh brothers subsequently sold their stake in the flagship company of the group – Ranbaxy to Japanese firm Daiichi Sankyo for an estimated $2.4 billion and decided to focus on Fortis and Religare.
The Glory Days and The Fallout
The brothers’ bet in health care industry took off well and Fortis got listed in 2007. The company saw its revenues grow more than six times between 2008-09 and 2012-13 to Rs 4,395 crore and the net profit jumped 23 times during the same period.
During the same year, Fortis surpassed Apollo Hospitals and became the largest hospital chain in India by revenues.
Since then, Fortis didn’t grow much in terms of revenue and also slipped into deep losses. During 2017-18, Fortis earned Rs 4,701 as consolidated revenues and posted a loss of Rs 988 crore.
The financial service arm, Religare, grew in terms of revenue till 2015-16. The company’s consolidated revenue was up almost four times during 2008-2015 to Rs 4,187.4 crore and Religare also posted a healthy net profit of Rs 154 crore during 2014-15.
But the company slipped back to red in the subsequent years as the revenues also started dipping. During 2017-18, the company recorded a consolidated revenue of Rs 2,693 crore and posted a net loss of Rs 1,193 crore.
Both Fortis and Religare went for massive expansion through inorganic route largely financed through debt.
Religare did as many as six acquisitions, while Fortis sealed more than 10 acquisition deals to expand its presence inside and outside India. But the expansion didn’t pay off and both the companies went into a debt-trap.
Ten years back, the two brothers, who were loaded with around Rs 10,000 crore in cash after selling off their stake in Ranbaxy. Cut to 2018, their businesses are in debt of around Rs 15,000 crore.
Also Read: Here’s how Ranbaxy and Fortis affected Singh brothers wealth
The fallout of Fortis and Religare also coincided with their trouble with the Daiichi-Ranbaxy deal.
Ranbaxy got into trouble with the United States Food and Drug Administration (FDA) on September 2008, after the US regulator issued two warning letters to Ranbaxy along with an import alert for 30 of the generic drugs produced by two manufacturing plants in India.
After a five year probe by US department of justice, Daiichi agreed for a $500 million settlement and in 2012, they filed a case against the Singh brothers in Singapore Court of Arbitration, for concealment of information during selling off their stake in Ranbaxy.
In 2016, the court ordered the Singh brothers to pay the penalty worth Rs 3,500 crore to Daiichi.
The brothers again landed in trouble early this year when Fortis and Religare came under the scanner of financial authorities for siphoning over Rs 2,300 crore from their listed companies.
Losing Control
The Singh brother resigned from the board of Fortis and Religare in February 2018. The brothers not only lost the board positions but their ownership in the companies also reduced.
The promoters’ stake in Fortis fell from 70.28 percent on September 2016 to 5.87 percent as the lenders invoked the pledged shares.
Similarly in Religare, the promoter’s shareholding got reduced to 3.01 percent as on June 2018, down from 50.89 percent, a year ago. Their remaining shareholding was also seized by the financial authorities.
After the Singh brothers lost control of their healthcare company, a four-month-long takeover fight started between bidders from as far away as US and China to take control of Fortis.
Finally, a month back, Malaysia-based IHH Healthcare Berhad, emerged as the winner in the race to takeover Fortis.
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