Malvinder and Shivinder Singh, the promoters of financial services firm Religare Enterprises Ltd, face fresh legal woes with a New York-based investor accusing the brothers of siphoning cash to finance their debt load of more than $1.5 billion, according to a report by Bloomberg.
Private equity firm Siguler Guff & Co’s fund Resurgence PE Investments Ltd (formerly Avigo PE Investments Ltd) has filed a case in the Delhi High Court alleging that Religare Finvest Ltd – Religare Financial Services' lending arm - fraudulently provided loans to the Singh brothers.
Resurgence PE Investments has a 6% stake in the non-banking financial company (NBFC). This is Resurgence's second legal case against Religare in as many months.
According to the report, Religare Finvest sanctioned 21 loans to seemingly independent firms and at least $300 million was channeled back to the privately-held companies of the Singh brothers.
The lawsuit seeks to stop Religare Finvest from lending money to the Singhs and halt the sale of other assets.
“The allegations made by Resurgence PE investments are completely baseless and we categorically deny them," Religare Enterprises was quoted as saying. “As the matter is sub-judice we cannot offer more comments. However we will comment further at an appropriate time."
A hearing in the case is set to take place on March 20.
In 2015, Siguler Guff, a limited partner in Avigo Capital, had taken over the responsibility to oversee exits from the investment firm’s portfolio in a rare such move.
The investors, which included International Finance Corporation (IFC), the World Bank’s investment arm, and CDC Group Plc. had a disagreement with Avigo founder and managing director Achal Ghai after he refused to step down as the manager of a 2005-vintage fund.
Troubled times
The case marks yet another blow to Religare Enterprises, which is already battling court cases and and regulatory scrutiny.
Last month, Resurgence PE Investments Ltd and fellow private equity firm Jacob Ballas dragged Religare Enterprises to court seeking to protect their investments in Religare Finvest Ltd. This was made public by the financial services firm on the stock exchanges.
Parallely, Japanese drugmaker Daiichi Sankyo had dragged the Singh brothers to an international court, alleging they had withheld crucial information while selling drugmaker Ranbaxy in 2007.
Over the past year, Religare Enterprises has exited a slew of businesses including companies involved in global alternative asset management, health insurance, broking and wealth management.
Religare Finvest Ltd had also received interest from strategic players for a potential acquisition last year.
Religare had in November reshuffled its top management with Malvinder Singh resigning as the company’s non-executive chairman and S Lakshminarayanan taking his place. The reshuffle also involved the exit of the company’s chief executive officer and finance chief.
Separately, the Singh brothers are also looking to sell Fortis Healthcare Ltd, India's second-biggest hospital chain operator. However, negotiations have been hampered by the promoters' legal battles The Delhi High Court had in March last year restrained Singh brothers from selling any assets without its permission.
Despite the controversies and court cases, Fortis has been attracting attention from potential investors. Late last year, VCCircle reported that Life Healthcare Group Holdings Ltd, which already has a stake in another Indian hospital network, had emerged as a potential strategic investor in Fortis.
Private equity firm TPG, which has a stake in Indian hospital chain Manipal Hospitals, and Malaysia’s IHH Healthcare, which exited its investment in India’s top healthcare operator Apollo Hospitals last May, have also been in talks to invest in Fortis for some months now.