BENGALURU:Businessman B.R Shetty, the founder of NMC Health in the UAE, was accused of flouting corporate governance rules, a city-based hospital which until recently was run by BR Life is allegedly in a fix. BR Life is a company owned by Mr. Shetty which also has hospitals in Udupi, Bhubaneswar, and Thiruvananthapuram.
SSNMC Super Speciality Hospital, located at Rajarajeshwarinagar, was run by BR Life with other stakeholders. After the scam in the UAE came to light, employees — many of whom were senior management members — allege many staffers who were part of the corporate office and the hospital were told to resign. Some senior managers pegged the number at least a 100.
One of the employees said that they were left in the lurch. “Last week we were given oral instructions by BR Life to put in our papers. We were told that the company would clear our dues and pay for our notice period. Now, we are not even sure if we will get our dues,” he said.
Many of the employees had EMIs and other financial commitments. “The situation in our industry is already bad owing to the COVID-19 pandemic. After the lockdown, we don’t know when we will be able to find new jobs,” the employee said on the condition of anonymity.
Doctors too who were appointed as staff of the hospital have reportedly been told that they would now get paid for the service they provide.
Another employee of BR Life said the company did not issue orders in writing as the State government had ordered that none of the employers can sack their employees. Several senior management members of the hospital said they were not longer associated with the company.
Shamanur Mallikarjun, former MLA who is also the joint secretary of Bapuji Education Association, said they were in the process of sorting out all the issues. “The hospital will continue to function and will be reopened again. We had given the hospital on lease and now we will take over the entire hospital,” he said.
Udupi-born and UAE-based billionaire businessman Mr. Shetty has been in the centre of the controversy over allegations of misappropriation of money and other fraudulent practices at NMC Health.
Shetty, who migrated from his native India with $8 in his pocket, went on to build a healthcare and financial services empire in the Gulf region. That earned him a spot on the World’s Billionaires list starting 2014 and allowed for such luxuries as a pied-a-terre on the 100th floor of Dubai’s iconic Burj Khalifa tower and a fleet of Rolls-Royces.
But six years later, Shetty, who turns 78 in August, has fallen from those exalted heights. His empire, built over more than four decades, suddenly unraveled and he dropped from the billionaires ranks this year. Shetty’s fortune suffered a blow after his two London-listed companies, hospital chain NMC Health and payments group Finablr, which accounted for more than 70% of his net worth, were enveloped in controversies.
Trading in the shares of NMC and Finablr has been suspended since February 27 and March 16, respectively, and their respective managements and boards have been replaced. Shetty resigned from NMC in mid-February but continues as co-chairman at Finablr. In April, a British court placed NMC, the largest private hospital group in the United Arab Emirates, under the charge of Alvarez & Marsal, a restructuring firm based in New York.
Shetty’s troubles started in December, when short seller Muddy Waters raised concerns in a report about NMC’s debt, alleging that it was vastly understated. Two days later, NMC called that report “false and misleading.” But the company’s shares tanked 64% in the days after the Muddy Waters report was published.
In late March, the company admitted to having debt of $6.6 billion, more than three times the $2.1 billion it reported in June last year. NMC also disclosed in the regulatory filing that some of the debt may have been “utilized for non-group purposes” and it was trying to “trace such proceeds with a view to considering what actions may be available to the Group to recover such monies.”
In a statement filed by Finablr to the London Stock Exchange (LSE) on April 29, Shetty said—in his first public comments—that he was “shocked” by the events and accused a group of current and former executives at Finablr and NMC of committing fraud. These executives, who are unnamed, allegedly carried out a number of activities using his name, including forging his signature, using a fraudulent power of attorney in his name, and creating “false and misleading” financial statements.
Shetty’s troubles have been compounded by questions on the size of his stake in NMC. In a regulatory filing in February, NMC said it had been informed by Shetty’s advisors that a part of his stake included shares he held for principal shareholders Khalifa Butti Omeir Bin Yousef and Saeed Butti Al Qebaisi. This complex arrangement had not been previously disclosed to the company.
In a follow-up filing a few days later, the company said Bin Yousef and Al Qebaisi had alleged that some of their shares had been pledged as security for loans taken by Shetty in an arrangement they “were not a party” to. In a filing on February 18 and then again in the first week of March, the company informed the stock exchange that Shetty’s advisers had disclosed that some of the pledged shares had been sold by the banks they had been pledged to and that the legal basis of those transactions was being investigated by them.
Problems have also been mounting at Finablr, the holding outfit for money remittance firms UAE Exchange and Travelex Group. Shetty, who founded UAE Exchange in 1980 and acquired Travelex, which operate’s the world’s largest chain of money-exchange shops, for $1.1 billion in 2015, listed this business in London in 2019.
But now Shetty’s stake in Finablr is under scrutiny as well. In a regulatory filing in January, Finablr said it had been informed that Shetty had pledged 392 million, or 56% of the company’s shares, as security for borrowings by his holding company.
Finablr has also said that its net debt may be around $1.3 billion, “materially above” the previously disclosed position of $334 million as of June 2019 .
Shetty’s generics firm NeoBiocon, a privately held joint venture with Indian billionaire Kiran Mazumdar-Shaw’s biopharmaceutical firm Biocon, has also run into trouble.
In the past decade, Shetty has been investing back home in India. His privately held healthcare firm BR Life has a presence in India, Nepal, Africa and the Gulf region, and he also owns the world’s oldest tea company, the Assam Company India.
Shetty has been in India since February when he came with his wife to see his last remaining sibling, who had been unwell and passed away last month, according to his spokesperson. After India’s lockdown due to the COVID-19 pandemic lifts, adds the spokesperson, Shetty plans to return to the UAE. The rest of his family remain in the UAE, including his son Binay, chief executive of BRS Ventures, the family’s holding company.