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Institutional EYE

Commentary on Corporate Governance Issues

Sholay, Satyam and Fortis Healthcare

Gabbar Singh “Kitne aadmi thay?”

Kaliya “Sardar, do aadmi thay”

Gabbar Singh “Do aadmi? ….. aur tum teen….phir bhi waapas aagaye. Khali haath”

The above dialogue from Sholay still reverberate and if twisted, fit well with the current developments at Fortis Healthcare Limited (Fortis). The company has two long-standing directors (- if you exclude the two additional directors appointed recently) on its board. Three entities have put in a bid for the beleaguered entity. Had the brothers still been in direct control, then even ‘sardar’ would not be out of place. The unusual development leaves Fortis’ shareholders asking if the board has sufficient depth to deal with the complexity of the sale and come up with a decision that best serves the company and its stakeholders

To evaluate the three bids, shareholders need more credence at the board-level: all four members of the current board have been associated with either the Fortis group, Religare group, or Ranbaxy for long tenures in the past.

IiAS believes the current board can get additional support in assessing the three bids and coming to a decision among the complex sets of pulls and pressures, without necessarily waiting for board expansion. As an alternate to expanding the board, the company must appoint a special committee to the board, that will advise the board on the sale. This committee should be tasked with evaluating the bids and structures, narrow in on the most suitable buyer and negotiate the final contours and terms with the chosen buyer.

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