First, the results were late in arriving. Fortis Healthcare Ltd had sought a 15-day extension to declare earnings for the second and third quarter of the current financial year on account of the statutory auditor's inability to complete the audit before the stipulated board meeting. To make matters worse, the latter, Deloitte, Haskins & Sells LLP, has red-flagged the just-released financial results. Deloitte, in fact, said that it has not performed an audit.
Let's start with the numbers. In an early morning regulatory filing, Fortis reported a consolidated net loss of Rs 19.10 crore for the quarter ended December 2017 against a profit of over Rs 453 crore in the same period a year ago. It also reported a Q2 net loss at Rs 23.61 crore. Total income during the December quarter stood at Rs 1,163.27 crore, marginally down from Rs 1,192.31 crore in Q3 FY17. The income has also dipped compared to the Rs 1,234.25 crore reported for the quarter ended September 2017.
These results come amid controversy and scrutiny of the company's finances over allegations that the Fortis Healthcare promoters - Malvinder Singh and Shivinder Singh - took at least $78 million (over Rs 508 crore at current exchange rate) out of the company without any board approval about a year ago. Fortis management, however, claims that its wholly-owned arm, Fortis Hospitals, had deployed funds to the tune of Rs 473 crore as secured short-term investments to group firms of its promoters. The company also expects to recover the outstanding amount in due course - it has already received Rs 70 crore from one of the companies. Nonetheless, the transactions attracted Sebi's scrutiny following resignation of the two promoters from the board.
The ongoing investigation is one of the reasons cited by Deloitte for not being able to "conclude on effects, if any of the outcome of the same on the financial results, state of affairs, cash flows, and operations of the group". Although Deloitte had not performed an audit, it said the interim results have been reviewed by other auditors whose report has been furnished to them by the management. According to a BloombergQuint report, the auditor also said that it was unable to "conclude whether the grant of inter-corporate deposits was in compliance with the company's internal policy, on the recoverability of these deposits and the possible effect on the financials of the company.
The other issue flagged off by Deloitte is "recoverability of certain vendor advances". Its review report mentioned unsecured advances of Rs 57.76 crore from certain vendors, adding that in the "absence of any security and delays in recoveries", it could not arrive at a conclusion.
In light of the above, the auditor claimed that "we have not been able to obtain sufficient appropriate evidence to form a conclusion on the Statement and hence we do not express a conclusion on the Statement".
In its response to the auditor's comment, the management said the effect of the outcome of the investigations on the financial results will be dealt with when the investigations are over. Meanwhile, Fortis Healthcare has said it will hire an external legal firm to carry out investigation into alleged siphoning of cash by the firm's promoters, Malvinder Singh and Shivinder Singh.
With PTI inputs