This article first appeared in The Edge Financial Daily on December 18, 2018

KUALA LUMPUR: IHH Healthcare Bhd remains committed to its India investment in Fortis Healthcare Ltd despite new hurdles to acquire an additional stake in the latter, IHH managing director and chief executive officer Dr Tan See Leng told the group’s staff yesterday.

In an internal memo sighted by The Edge Financial Daily, Tan said although the Supreme Court of India had ordered the group’s acquisition plan of Fortis to maintain the status quo, the development does not in any way diminish management’s resolve and commitment to grow the Indian healthcare group.

“We will continue to execute our plans to stabilise Fortis and ensure that it achieves its full potential as part of the IHH family. You are the heart and soul of Fortis. We are confident that with your continued support and efforts, we can move forward together to make Fortis India’s leading healthcare provider,” he said.

Tan’s note to staff came after the Supreme Court of India issued a directive last week that the “status quo” be maintained in the sale of the controlling stake in Fortis to IHH. The ruling came after a contempt petition filed by Daiichi Sankyo Co Ltd in its dispute against the former promoters of Fortis Malvinder Singh and his brother Shivinder Singh.

Daiichi Sankyo, a Japanese drug maker, is seeking an arbitration award amounting to US$385 million (RM1.61 billion) from the Singh brothers, following a dispute with them arising from Daiichi Sankyo’s acquisition of pharmaceutical company Ranbaxy Laboratories Ltd.

Daiichi Sankyo sought the court order to stop IHH from acquiring Fortis because the Singh brothers had pledged their shares in Fortis to satisfy the award.

Following the court order, IHH announced in a Bursa Malaysia filing yesterday it had paused its mandatory open offer to acquire another 26% shareholding in Fortis.

IHH said its wholly-owned subsidiary Northern TK Venture Pte Ltd (NTK) and the persons acting in concert will not be able to proceed with the open offer for the time being until further orders, clarifications or directions are issued by the Supreme Court or the Securities and Exchange Board of India.

“The board also wishes to clarify that IHH, PPL (Parkway Pantai Ltd) and NTK were not a party to the proceedings before the Supreme Court of India and that the order does not impact the subscription which was completed on Nov 13, 2018 in accordance with applicable law, resulting in IHH through NTK owning 31.1% of the expanded voting share capital of Fortis,” the filing read.

The group is now in the process of evaluating the court order and seeking appropriate legal advice on the matter before deciding on a future course of action.

“IHH remains the largest shareholder of Fortis, having a controlling stake of 31% by way of equity shares allotted through preferential allotment. IHH already made an infusion of INR 4,000 crore into Fortis last month to meet Fortis’ immediate capital requirements and will ensure that it continues to operate smoothly,” Tan, in the memo, added.

IHH shares closed five sen or 0.93% lower at RM5.35 yesterday, giving it a market capitalisation of RM46.92 billion.