Fortis Healthcare Limited (FHL; rated: CRISIL AA-/CRISIL A1+/Rating Watch with Developing Implications) informed the stock exchanges on September 22, 2022, that the proceedings before Hon’ble Supreme Court of India in Suo Motu Contempt Petition No. 04 of 2019 (“Suo Motu Contempt Petition”) have concluded with certain directions and the suo-motu contempt has been disposed of. FHL had reiterated its commitment to its core purpose of patient care and that it will continue to focus on its strategic and operational objectives to further strengthen and expand its healthcare network.

It may be noted that in November 2019, the Hon’ble Supreme Court of India had vide its judgment dated November 15, 2019, initiated certain suo motu contempt proceedings against inter alia FHL, the erstwhile promoters of FHL, and their related entities in relation to certain previous orders issues by the Supreme Court including a status quo order of the Supreme Court dated December 14, 2018 (“Status Quo Order”). The Status Quo Order had directed that status quo be maintained with respect to the sale of controlling stake in FHL to IHH Healthcare Berhad (“IHH”). Pertinently, at the time of IHH’s investment of approximately Rs. 4,000 crores in FHL through Northern TK Ventures Pte Ltd. (a step-down subsidiary of IHH), in lieu of preferential allotment of 31.1% equity shares of FHL – there were no judicial orders or directions preventing the acquisition by IHH of any shareholding in FHL.

Subsequently, FHL, in its stock exchange announcement dated September 23, 2022, intimated that the Hon’ble Supreme Court of India pronounced the final judgment in respect of the Suo Moto Contempt Petition and the connected proceedings, (i.e., Special Leave Petition (Civil) No. 20417 of 2017 and the Contempt Petition No.2120 of 2018 in SLP (C) No.20417 of 2019) on September 22, 2022 (“Judgment”). The Hon’ble Supreme Court of India has, by way of the Judgment, held inter alia that the Suo Motu Contempt Petition and the connected proceedings have been disposed of. The Hon’ble Supreme Court has not found nor indicated, any wrongdoing by FHL in terms of the investment by Northern TK Ventures Pte Ltd into FHL, in its Judgement. The Supreme Court has specifically clarified that the acquisition of the business portfolio of RHT Health Trust by FHL appears to prima facie be an acquisition of proprietary interest to subserve the business structure of FHL. However, the Supreme Court has clarified that the facts on record are not adequate to definitively evaluate these issues concerning the acquisition of such proprietary interests accordingly has issued a direction to the executing Court i.e. the Delhi High Court, may also to inter alia consider issuing appropriate processes and appointing forensic auditor(s) to analyze the transactions entered into between FHL and RHT Health Trust and other related transactions. The Judgment further provides that it will be open to the Delhi High Court to pass such directions as the facts and circumstances presented before it may justify.

The outcome of these proceedings before the Delhi High Court, including any punitive action, which may have a bearing on the financial risk profile of FHL will remain a monitorable. FHL continues to report steady improvement in its performance, supported by healthy demand for healthcare across geographies.

CRISIL Ratings will continue to engage with the FHL’s management, monitor developments, and take appropriate need-based rating action once clarity emerges on these aspects.

The ratings continue to reflect the strong market position as well as financial risk profile of FHL. These strengths are partially offset by exposure to regulatory risk in the healthcare industry.

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