Fortis stake sale: If things drag, no one will get anything, says Munjal

A day after the Fortis board chose their offer as the most suitable for the liquidity crunch-hit health care major, Sunil Kant Munjal of Hero Enterprise along with Anand and Mohit Burman of Dabur had a busy day — talking to large portfolio investors, legal experts and also drawing up a strategic plan for Fortis. 

“We have already started working on a plan to revive Fortis — there are three parts to the plan. One is an immediate one, that could be implemented in a month, the second is a three month plan that takes care of the medium term concerns over growth etc, and the last is a long-term one-year plan for charting out a revival of this asset,” said Munjal. The rider is that for them to start work, they need the competition commission’s and the shareholder’s nod. 

Munjal and Burman are confident that the Fortis shareholders will not reject the board’s decision. 

“The shareholders want value for their investment. They also want stability and growth for Fortis. Why would they reject this offer? If things drag on for another six months, then the system collapses and no one gets anything,” Munjal reasoned. 

He highlighted that since Fortis is under severe liquidity crunch, it is their offer that would bring in the money upfront. “In fact, once the process completes within 30-days or so, the money can come in within two months,” he said. 

Meanwhile, on the question of divesting SRL, Munjal said that a decision is not yet taken. Sale of the diagnostic arm is not necessary to fund the RHT assets acquisition, Munjal clarified. 

“Both Fortis Hospital and SRL Diagnostics are great assets. We think that as a business, Fortis needs great attention, and so does SRL. We have to see if we have enough bandwidth for the same. If we do not, then we need to take a sensible business decision and sell SRL,” he added. 

Munjals and Burmans have not done any due diligence so far, and unlike the other bidders, they have also not worked closely with the Fortis management over the past one year. The duo now want to sit down with the Fortis management, and get deeper into understanding the business. Critical decisions like sale of SRL may be taken up post that. 

They have already spoken to some of the large investors on Friday, and Munjal claimed that they have received very encouraging response. “Our association with the Fortis brand, has increased its credibility. Both Hero and Dabur are known for highest levels of corporate governance,” Munjal said emphatically. 

The duo also do not wish for the Singh brothers, erstwhile promoters of Fortis, to continue on the SRL board. Malvinder and Shivinder Singh have resigned and Munjal felt that it is best that they stay away. 

“They do not have any shareholding at the moment. There is so much noise around funds, governance, SFIO investigations. It is best that the Singh brothers stay away from Fortis,” he said. 

In their latest offer, the Munjal-Burmans have offered to invest Rs 18 billion in Fortis through a combination of preferential issue of equity and warrants. Their offer values Fortis at over Rs 90 billion, or roughly translates into Rs 172 per share. 

The duo have proposed an upfront infusion of Rs 10.5 billion directly into Fortis. The remaining investment of Rs 7.5 billion will be infused into the company over the next four months. They have also sought three board seats in Fortis.

The offer is binding and there is no scope of backing out. Is it a cause of concern as the Luthra and Luthra investigation report is expected in May 2018 while the Grant and Thornton audit is also expected this month. 

Munjal-Burman feel that this would act as due diligence for them. “We will know a lot more about the company than what is known,” said Munjal.

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