“But, how could they…? I mean how did they manage to bring down such a massive business empire,” a Delhi-based industrialist said, when asked about how the Delhi business club views the decline of the Singh brothers—Malvinder Singh and Shivinder Singh of Fortis Healthcare Ltd. He insisted that Sunil Munjal and Anand Burman should have sued Fortis for not letting them take over the company after they formally won the first round of bids, which was cancelled. But, why initiate a legal process? “Because such assets are built once in a lifetime… You do not get an opportunity like that… There was a time when we thought the brothers will create a business giant out of Delhi. We envied them…,” he said, requesting not to be named. “So, where did they wrong?” Mint asked him, and several other members of Delhi-based business families, who take pride in calling themselves a part of the so-called Delhi Club, which is along the lines of the Rahul Bajaj-led Bombay Club of the 1990s. The Delhi Club doesn’t have a leader. It was once mentored by Hero Group founder Brijmohan Lal Munjal and now looks up to Bharti Airtel founder Sunil Mittal.
There were no definite answers to questions on where they went wrong, though some said it was about being overambitious, while a few others said it was about being over smart. But in doing so, they have brought down a business empire set up by their grandfather Bhai Mohan Singh and grown by their father Parvinder Singh, both of whom are now deceased. To be sure, the two brothers are sharp and intelligent individuals with education from some of the world’s best institutions. They represented a legacy that had been created by their father, who grew the business exponentially to make Ranbaxy India’s foremost pharmaceuticals firm. However, in the 1980s, the group saw a bitter family tussle and boardroom battle between father (Bhai Mohan Singh) and son. Finally, Parvinder wrested control of Ranbaxy. One of Parvinder’s milestones came in 1992 when Ranbaxy entered into a marketing agreement with the US drug maker, Eli Lilly. Parvinder died of cancer, aged 56, in 1999, a week after he formalized a succession plan in line with his belief of letting professionals run the company. He didn’t induct his sons to the company’s board; instead, he named senior executive DS Brar as the CEO. While Malvinder, then 27, had joined the company, Shivinder, then 23, was finishing his education. From him they inherited Ranbaxy and financial services firm Religare, besides tertiary businesses in aviation and so on. Shivinder and Malvinder co-founded Fortis Healthcare in 2001.
Dismal report card
Initially, the going was good. Religare did some half a dozen acquisitions, and aspired to become a bank. Fortis also grew rapidly through dozen-odd acquisitions and spread its presence to 11 countries. The sale of the family jewel Ranbaxy to Japan’s Daiichi Sankyo in 2008 for USD 4.6 billion gave the Singh brothers the cash to fuel their ambitions. But 10 years later, nobody knows where that money has gone. The sale took place just months before the US Food and Drug Administration banned imports from two of the generic drug maker’s Indian plants. That same year, the US department of justice launched a probe, eventually resulting in a guilty plea by Ranbaxy and a USD 500-million settlement for selling adulterated drugs. The Singh brothers were not named in the probe. It ended badly in February 2018, with the Delhi high court upholding an international arbitration order directing the brothers to pay ₹3,500 crore to Daiichi Sankyo for misleading the Japanese drug maker during the deal by withholding information.
The other businesses floundered.
In a burgeoning business such as healthcare, where the Singh brothers should have leveraged their strong presence along the value chain (pharmaceuticals production and distribution to hospitals) for market leadership, they found themselves out in the cold, even as newer entrants such as Sun Pharma and Dr Reddy’s in pharma, and Manipal and Apollo in hospitals, took up pole positions. A look at the operational results of Fortis since 2010 shows the rot did not set in overnight, but had been a long time in the making. Net profit at the firm, which was ₹30 crore in 2009-10, went up to ₹201 crore in 2011-12. Thereafter, profit started declining. Since 2014-15, the company has been posting losses. What’s worse, the loss of business came with a series of allegations and investigations into murky dealings in the companies controlled by them. Recently, Securities and Exchange Board of India (Sebi) and Serious Fraud Investigation Office (SFIO) have opened an investigation of alleged money laundering to the tune of ₹445 crore in Fortis, followed by a Luthra and Luthra report, which has blamed the brothers. In fact, investigations and court cases have become routine affairs. In January, Religare was taken to the Delhi high court by a New York investor. The promoters of financial services firm Religare Enterprises allegedly siphoned some $300 million to their privately-held firms. Subsequently, the company denied any wrongdoing. The “allegations were completely baseless and we categorically deny them”, Religare had told Bloomberg in an emailed response. The matter is now sub judice.
In the beginning
The story began in pre-Independence India in Amritsar, Punjab. Ranbaxy got its name from two cousins, Ranjit and Gurbax, who started a drug distribution firm in 1937. After failing to repay a loan, they had to forego their company in 1947 to a businessman, Bhai Mohan Singh, who had come to Delhi from Rawalpindi in Pakistan after Partition. Under Bhai Mohan, the company launched its first blockbuster drug, Calmpose, in 1961. His son, Parvinder, took the company abroad, setting up plants outside India. Following Parvinder’s death in 1999, Malvinder and Shivinder expanded the company’s horizons beyond pharmaceuticals. Shivinder was in his first year of MBA at Duke University when his father died of cancer. Parvinder’s brother, Analjit, is a billionaire investor, who owns the Max group that runs businesses spanning hospitals, insurance and real estate. Analjit owned a 24.65 percent stake in Vodafone’s Indian subsidiary until 2014, around the time the telecom industry went into a downward spiral in India. A knack to exit businesses at the right time seems to run in the family.
Parvinder and Analjit have another brother, Manjeet, who used to own Montari Industries, which owned the Indian franchise of Bausch and Lomb. Manjeet once wanted to build a five-star hotel on the family house in Lutyens Delhi. Today, these properties are controlled by Analjit. Malvinder and Shivinder were close at one time, but now they seem to have differences. Mint on 2 July reported that Shivinder, a former executive vice-chairman of Fortis, claimed that he was not in a position of authority when Fortis gave unsecured advances worth ₹445 crore to three companies affiliated to the Singh brothers. Malvinder, who stepped down as executive vice-chairman in February, countered this by saying that all decisions were taken collectively, and were approved by designated signatories. When contacted by Mint, Malvinder did not offer any further comments. The allegations and counter-allegations have surfaced after government agencies opened a probe against the Singh brothers following an internal investigation by law firm Luthra and Luthra, which found mismanagement of funds. The latest development has put the once close relationship between the two brothers to the test.
“Post retirement, I continued as a shareholder of the group. My role in Fortis was that of a non-executive board member, effective January 2016, till I resigned from the board in February 2018,” Shivinder said in an interview. “I had no role in Religare since I stepped off the board in 2010. I got back on the board of Religare in July 2016 when certain mismanagement came to light,” he added. Now it seems Shivinder wants to fix problems at Fortis Healthcare. “Shivinder went to spiritual sect Radha Soami Satsang Beas to be there permanently, but now he has to get back his reputation. He wants to fix the issues and then go back,” said a person close to the family, requesting anonymity.
The Radha Soami connection
Radha Soami Satsang Beas (RSSB), a self-described “philosophical organization” was founded in 1891 by Dera Baba Jaimal Singh. Shivinder is the nephew of the sect’s current guru, Gurinder Singh Dhillion, referred to as “babaji” by followers. The previous guru, Charan Singh, was Shivinder’s maternal grandfather. Gurinder is the fifth leader of the sect, which is based out of Beas near Amritsar. Film actor Shahid Kapur is one of its followers and his wedding with Mira Rajput was facilitated by the sect. Their wedding was held at a farmhouse owned by Shivinder. Gurinder played a pivotal role in putting Shivinder and Malvinder at the top at Ranbaxy after a battle for control of the drug maker followed Parvinder’s death in 1999.
Shivinder is expected to succeed Gurinder. “Gurinder has looked after Shivinder as his own son and he is expected to take over the leadership of the sect,” said a person close to the family, who did not want to be named. There have been significant business links between Fortis Healthcare and Religare Enterprises (both promoted by Malvinder and Shivinder) and RSSB. The family of Gurinder Singh, including his sons Gurpreet and Gurkirat, owned a significant stake in Religare, as reported by Mint in July 2015. Gurinder’s son Gurpreet served as the chief executive of Religare Health Trust (RHT), a subsidiary of Religare. Singapore-based RHT is the holding company of Fortis Healthcare.
The family friend
Religare was run by the Singh brothers’ one-time close confidante Sunil Godhwani from 2001 to 2017, before he decided to step down. “He was introduced to the Singh brothers by the RSSB,” the person close to the family said, adding that Godhwani was also an ardent follower of the sect. According to another person, who once oversaw operations at the group, Fortis’s treasury operations—under scrutiny now for approving unsecured loans to the Singh brothers—were started by Godhwani. While Shivinder and Malvinder were involved in Fortis Healthcare and SRL Diagnostics, Godhwani ran Religare and privately-held companies of the family, including RHC Holding. The group also had an aviation business, Religare Aviation, which was run by Sanjay Godhwani, Sunil’s brother. Sunil Godhwani enabled the Ranbaxy-Daiichi deal for the Singhs. He was actively involved in Fortis’s acquisition of Wockhardt Hospitals and Parkway Hospitals in Singapore. “He looked at group treasury operations, group funding, group financing and group deployment of money. In 2011, he was the person who started the treasury operations in Fortis.
This has been a consistent activity and this has been the only profitable activity of the business because the hospital business never made profits till today. That has been an ongoing operation and a successful operation,” said the person who oversaw operations at Fortis. “There was a fallout between them (the brothers and Godhwani),” said the person quoted above. The Singh brothers have blamed Godhwani for creating legacy issues in the organization and they parted ways in 2014. “The company is in the present situation due to the legacy issues of previous management led by Sunil Godhwani. The serious mismanagement under his leadership drew the attention and intervention of the regulators. The situation forced the Singh brothers to come on to the board of Religare,” a Religare spokesperson told The Economic Times in February. Godhwani could not be reached for comment. The Ranbaxy business dynasty is now in disarray. With a slew of legal and regulatory battles ahead, the Singh brothers have limited elbow room to start a new business or revive remnants of existing ones. A rich legacy has been squandered. – Livemint