Malvinder, Shivinder Singh

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The fall

Rs 25 bn loans to their guru

Ari Altstedter- Bloomberg, How Malvinder and Shivinder Singh burned through $2 bn for their guru, August 17, 2018: Ari Altstedter, Bloomberg

Gurinder Singh Dhillon is a key character in the unravelling of the financial and health-care empire owned by the Singh brothers

Along the river Beas in North India sits a sprawling spiritual commune that's somewhere between a traditional ashram and a Florida gated community. There's a grand meeting hall with tiered spires and pearl domes, but also tract housing and an American-style supermarket. It's home to 8,000 devotees of the Master: Gurinder Singh Dhillon.

His group, the Radha Soami Satsang Beas, says it has more than 4 million followers worldwide. Many call him a God in human form. But in the secular world of money, Dhillon, 64, is a key character in one of the most dramatic collapses in the annals of Indian business: The unravelling of the financial and health-care empire owned by the Singh brothers, Malvinder and Shivinder.

Over the years, the brothers' main holding company loaned about Rs 25 billion ($360 million) to the Dhillon family and property businesses largely controlled by them, according to documents and people familiar with the matter. Some of those outlays were financed with money borrowed from the Singhs' listed companies, and when combined with other Singh investments gone bad threw their empire into a debt spiral, a Bloomberg News analysis of public records and interviews with 10 people familiar with the finances of both camps showed.

Heirs to a generations-old business house once worth billions, the brothers have in the last six months seen a dramatic fall in their fortunes. They've had their public shareholdings seized by lenders. They're under a criminal probe by financial authorities over Rs 23 billion missing from their listed companies. They owe $500 million over fraud allegations related to the 2008 sale of drugmaker Ranbaxy Laboratories. They've also lost the family mansion. Both deny any wrongdoing.

Gurinder Singh Dhillon, cousin of Singhs' mother

Dhillon is a cousin of the Singhs' mother, and he became a surrogate father to them after the death of their own in the late 1990s. Since then, the finances of the spiritual leader and the brothers have grown intertwined, with money flowing from the Singhs to the Dhillon family via loans through shell companies and an array of arcane financial instruments, according to the documents and people familiar with the matter, who asked not to be named because of the ongoing legal probes. Dhillon hasn't been accused of any wrongdoing.

All members of the spiritual commune, including the guru, are expected to support themselves financially, and the sect's representatives said the Master's business dealings are a personal matter separate from his role at the spiritual group.

The Singhs' downfall comes as Prime Minister Narendra Modi pushes to increase transparency and attract more foreign investment to the world's fastest-growing major economy. But the brothers' story is a cautionary tale to anyone doing business in India, offering a window into the opaque corporate structures common in the family dynasties that dominate Indian commerce.

"This opacity makes for risk," said Arun Kumar, an economist with the New Delhi-based Institute of Social Sciences. "Legitimate business people may not want to come to India."

The Singhs are famous for expanding their two public firms – hospital operator Fortis Healthcare Ltd and financial firm Religare Enterprises Ltd – at breakneck speed after reaping $2 billion from the Ranbaxy sale. Less known is the massive debt they took on to do so, all while they were financing a real-estate portfolio largely owned by their guru's family.

Malvinder, 45, and Shivinder, 43, haven't been charged with any crimes. The brothers acknowledge having financial ties to Dhillon, and in written comments said they are in dialogue with the Dhillon family and its companies to address the money owed to them.

But they also said it would be "untrue" to suggest that the guru was a cause of their group's financial troubles. "Malvinder and Shivinder are unequivocal about this: Mr Dhillon is their spiritual Master," the brothers wrote. "He has only ever acted out of love and has only ever had their best interests at heart."

They're less generous to another follower of the spiritual group, Sunil Godhwani, whom they say was appointed to lead Religare at Dhillon's recommendation. They say Godhwani was also in charge of their holding company, RHC Holding Pvt, and often took decisions without informing them. They say he was the architect of the financial structures, including the loans to the Dhillon family and companies, that led to their financial troubles.

Bloomberg News has been unable to independently verify the Singhs' claims that Godhwani ran their holding company in the period between 2010 and 2016, when most of the major borrowing, loans, investments and routing of funds occurred. RHC says he was president there between 2016 and 2017. Godhwani declined to comment, and he left his role as chairman of Religare in 2016.

For his part, Dhillon also declined to be interviewed. A statement from J C Sethi, secretary of Radha Soami Satsang Beas, said Dhillon played a role helping the Singhs assert control of their father's businesses following his death, and in guiding them after. But since 2011, ill health, including a battle with cancer, caused the guru to step back to focus on his spiritual duties, he said. "The Master can advise but he cannot make a choice for you," he added.

Representatives for the spiritual group said the Master has no role in its administration or finances.

Earlier this year, Bloomberg News reported that the Singhs had taken Rs 5 billion from Fortis without board approval and that a New York investor had filed a lawsuit accusing the brothers of syphoning Rs 18 billion from Religare.

The Singhs say they didn't do anything illegal. They say Godhwani was in charge of both Religare and RHC at the period in question. The movement of funds at Fortis were part of normal operations at the time, and only later became related-party transactions, according to the brothers.

India's stock market and fraud regulators launched investigations into financial irregularities at both companies, although they are yet to report their findings. Both agencies didn't respond to requests for comment.

The Singhs' rise as businessmen in their own right began in 2008, when they sold Ranbaxy, then India's largest drugmaker, to Japanese pharmaceutical company Daiichi Sankyo Co. The sale occurred just as the US Food and Drug Administration started raising questions about the Indian firm's manufacturing practices and the safety of its drugs, although Ranbaxy denied the allegations at the time.

The brothers went on to use their cash reserves aggressively to build up Fortis and Religare - which would each top $1 billion in market value as India's demand for health and financial services surged. They took their father's place in Delhi high society among other old business families, becoming patrons of Indian artists and socialising at exclusive clubs.

Then in 2013, Ranbaxy pleaded guilty to criminal felony charges in the US and faced $500 million in fines. In an arbitration tribunal in Singapore, its new owner, Daiichi Sankyo, accused the Singhs of concealing the extent of its regulatory problems during the sale. The Singhs say they didn't conceal any information.


Rs 25 bn

Paying off family

debts and taxes*

Rs 25 bn

Loans to Dhillon family

and companies

Rs 22 bn

Investment in

Fortis Healthcare

Rs 18 bn

Investment in

Religare Enterprises

Rs 12 bn

Investment in

Religare Capital Markets

Rs 9 bn

Loans to airline business

Rs 7 bn

Loans to Religare

Corporate Services

Note: Only major cash deployments are shown. * Estimates based on sources familiar with the family's finances.

Sources: Ministry of Corporate Affairs, estimates based on sources familiar

Father figure

By that time, Dhillon was playing a big role in the Singhs' finances. He was their "central father figure" after their own died in 1999, they wrote in their statement. Sect members held key positions in the Singh empire: One became chairman of Ranbaxy's board, helping ensure Malvinder's swift rise to the top.

Another devotee, Godhwani, led Religare.

The Dhillon family would eventually become Religare's second-largest shareholder, after the Singhs, with money lent to them by the brothers, according to people familiar with the matter. Godhwani consulted with Dhillon regularly on Religare, as would the Singhs on Fortis, the people said.

In 2015, the younger brother, Shivinder, briefly took a hiatus from the business to work at the spiritual group full time.

A photograph on the sect's website shows Dhillon with a white beard, white turban and flowing white tunic. But several people who know him say he's fond of self-deprecating jokes, and in private is more charismatic everyman than ethereal mystic.

As many as 500,000 devotees sometimes visit the ashram at once to listen to his teachings of how meditation, vegetarianism and high moral values can help one escape the cycle of death and rebirth.

He emphasises community service. On a recent Tuesday at the commune, a battalion of women volunteers sat at giant wood-fired griddles, making chapatis, the Indian flatbread. Some days they roll out more than 80,000 an hour to feed hungry pilgrims.

Still, Dhillon hails from a family of major landowners in Punjab, and was himself a businessman in Spain prior to his ascension at the spiritual group. So he took an active interest in the Singhs' holdings, the people said.

"I think he's a businessman in his mind first, and a guru second," said Brian Hines, an American who was a member of the sect's US community for 35 years and has visited Beas. He now blogs critically about it, having since left.

New millionaires

By 2010, another business opportunity emerged. Towns outside India's capital, New Delhi, were experiencing a property boom that was turning farmers into millionaires. The Singhs' resources were marshaled to help the Dhillon family build a real-estate empire.

Two companies, Prius Real Estate Private Ltd and Lowe Infra and Wellness Private Ltd, were set up by people close to the guru, and although partly hidden by layers of shell companies, the Dhillon family had ownership interests in both, people familiar with the matter said and filings show.

Over the next two years, these firms together received about Rs 20 billion in zero-interest loans from the Singhs' private holding company or its subsidiaries, according to the people and the documents. Funds were then disbursed to other companies controlled by the Dhillons. The Singhs owned a 51 per cent stake in Lowe.

Debt mountain

These loans proved costly to the Singhs, coming on top of other major financial commitments that were underway. From 2011 onwards, the brothers' holding company went on to sink at least Rs 12 billion to cover losses at their investment banking venture Religare Capital Markets Ltd. Other loans went to Ligare Voyages Ltd, a money-losing charter airline.

The Singhs' holding company also loaned at least Rs 7 billion to cover losses at a firm that had been spun out of Religare to manage the financial firm's administrative costs. The loss-making firm's biggest expense was rent, much of which was paid to buildings owned by the guru's family, according to documents and people familiar with the matter.

In some cases, Religare had no use for all the space it was leasing from the guru's buildings and large parts sat empty, the people said and internal documents show.

RHC, the holding company, also made personal loans of Rs 5 billion to Dhillon family members, via a network of shell companies, people familiar with the matter said.

The Singhs funded all these outlays to the guru's businesses and to their own ventures with borrowing. And a substantial portion came from Fortis and Religare, often through the same network of shell companies used to lend to the guru's family, people familiar with the matter said.

Taken together, the zero-interest loans to Dhillon firms and Singh investments gone bad created a crushing debt load that required even more borrowing to service. Their total borrowings hit about $1.6 billion by March 2016, filings show.

As things deteriorated, funds at the two primary public companies controlled by the Singhs, Fortis and Religare, were continuously routed back and forth via shell companies to deal with cash shortages elsewhere in the Singh family empire, according to multiple people familiar with the matter.

Then came the final blow. In 2016, the Singapore tribunal sided with Daiichi Sankyo in its long-running suit against the brothers, awarding the Japanese firm about $500 million in damages and interest. The Singhs are appealing the ruling. But with the added liability, outside lenders to the brothers were reluctant to keep the taps open, even as the brothers offered up their family home and company shares as collateral.

By 2016, they couldn't pay back the latest in the series of loans that had been going in and out of Fortis for four years, which amounted to about Rs 5 billion. When India's central bank discovered Rs 18 billion taken from Religare had gone to subsidiaries of the Singhs' main holding company, it demanded it be paid back, but it still hasn't been.

Finally, banks seized assets backing their loans, including the majority of their shares in Fortis and Religare. They had to sell the home they grew up in to pay back another lender. The Singhs have said they are working to resolve issues with stakeholders.

Minority shareholders took over at Religare. A bitter takeover battle kicked off for Fortis and Malaysia's IHH Healthcare Bhd in July agreed to take control of the hospital operator.

The New Delhi property boom Dhillon's family companies invested in has since gone bust. And those real-estate companies have their own debt beyond what was lent by the Singhs, according to people familiar and documents.

Between personal loans and complicated company structures, it's hard to tell exactly how much Dhillon still owes his nephews and what assets they still hold. For the Singhs' other lenders, Daiichi Sankyo, or law enforcement seeking penalties, recovering this money from the Singh empire may depend on the terms of arcane debt securities, which aren't public and can be changed with the consent of both parties.

Complicating matters is that ancient ties of clan and religion are hard to shake in India. Asked what the Singh brothers would do for their Master, one person who knows the family answered in one word: "Anything."

Downward spiral: 2008-16

Pavan Lall & Ram Prasad Sahu, March 27, 2018: The Times of India

Companies sold by the Singh brothers, 2008-16
From: Pavan Lall & Ram Prasad Sahu, March 27, 2018: Business Standard

How the distressing spiral of Malvinder and Shivinder Singh came to be Overexpansion, bad management, and multiple allegations irreparably taint Malvinder and Shivinder Singh

What do you get when two brothers, third-generation scions of a business house with a solid reputation, exit their stake in their flagship company for $2.4 billion? Such inheritors who leverage cash, industry know-how and pedigree to step bravely into the future would be the ideal answer. However, the sad reality is that Malvinder and Shivinder Singh have all but destroyed the very legacy that their grandfather Bhai Mohan Singh and father Parvinder built and stood for as the brothers find their capital evaporating, a result of their bad investments and misplaced strategies amid a flurry of lawsuits and allegations.

Just recently, the Delhi high court ordered attachment of all moveable property disclosed in an affidavit by Singh brothers and others in relation to the Rs 35-billion arbitration case by Daiichi Sankyo, Japan. After the Singapore arbitration court had asked Singh brothers to compensate Daiichi for withholding vital information at the time of sale, the Japanese firm had approached the Delhi high court to collect dues, which was challenged by the brothers.

However, the Delhi court has upheld the arbitration order and attached their properties. The Singh duo is also being accused and sued by private equity Siguler Guff & Company on allegations of having siphoned funds from Religare; finally, auditors Deloitte waved red flags at them for over Rs 5 billion in unsecured advances fronted to vendors and an inter-corporate group deposit given to a promoter-related company.

Back in 2014, the US Food and Drug Administration had come down hard on the generic drug giant Ranbaxy Laboratories. The agency announced a ban on imports from the company’s manufacturing plant in Toansa, Punjab. It was the fourth Ranbaxy factory to be barred by the agency since 2008 where it found “numerous infractions” that included laboratories in significant disrepair, and overwriting of data until acceptable results were achieved.

It is not that the brothers did not try to build new businesses. After their stake sale in 2008, they set up a special purpose vehicle (SPV) RHC Financial Services in Mauritius to allow them to buy overseas assets with ease. Shortly thereafter, the SPV-controlled Fortis International (separate from the Indian company Fortis Healthcare) as well as six other companies that it snapped up and which included ready and under construction hospitals in Sri Lanka, Hong Kong, Australia, and Singapore. There was even a diagnostics play they made in Dubai recently.

In the meantime, Fortis’ India growth was more substantial, going from one location in 2001 to 66 hospitals by 2011, which included 10 hospitals it bought from rival Wockhardt. The tell-tale signs should have been evident when the company spent a sizeable chunk of change - $650 million - to buy a one-fourth stake in Parkway Hospitals of Singapore.

Fuelled by cash from selling inherited shares, the brothers were biting off more than they could chew, despite being strait-laced in every other way. One former employee who interacted with both of them and declined to be named said that neither was a profligate spender nor a party animal, which could have caused them to let business spiral. “In fact, they had novice, they did not smoke or drink, and were vegetarian,” he adds. On the contrary, Malvinder, a regular at the World Economic Forum in Davos spoke about India’s pioneering role in health care and partnered Bollywood actor Salman Khan’s Being Human Foundation to subsidise surgeries for children. Then in 2015, Fortis Healthcare’s co-founder Shivinder said he would move on to serve full-time at the spiritual retreat Radha Soami Satsang Beas to pay heed to an inner calling. He was just 40 years old at the time.

A management expert says there are two ways to succeed with international acquisitions: Find strategic fits to the core business or if it is a diversification, buy and then rebuild culture from the ground up or allow what remains to thrive. It is not clear if any of that was thought through clearly when expanding and the business establishment was noticing. One executive search professional, who declined to be named, said “it was difficult to get notable independent directors on board because they all saw what was happening.” She goes on to add that in 2009, million-dollar salaries were being thrown at chief executive officers by the company.

Another former financial executive at Fortis, who declined to be named, said, “Malvinder was the big-picture guy looking at deals and buyouts, while Shivinder was in charge of day-to-day operations.” When pressed for answers as to what really went wrong at the core of it, the executive said it was Religare Enterprises, the duo’s financial services foray, which was the undoing of the group. They were paid salaries of over Rs 10 million a year to many mid-level employees and the whole approach was a little overboard, he adds. In 2009, Religare even gave 30 German luxury cars to top employees as retention bonuses, according to public reports.

All of the spendings was, however, coming at a cost. By 2011, debt on the publicly traded Fortis had crossed Rs 70 billion, and debt-to-equity, which a year ago was at 0.3, spiked 2.2 times. The cause? The buying of promoter stakes in SRL Diagnostics for Rs 9.6 billion and the collective debt of Fortis International at Rs 32.7 billion.

Realising they had taken on more responsibility than they could handle, the brothers aggressively started paring their holdings. First up was the profitable Australian subsidiary Dental Corporation that was sold to Bupa Healthcare for Rs 15.5 billion. That was followed by getting rid of the Singapore-listed Religare Health Trust for Rs 22 billion, followed by hiving off Rs 3.7 billion worth of equity in SRL Diagnostics. All these measures helped the company bring down debt to a reasonable Rs 23 billion and debt-equity to about 0.6 times.

More than 98 per cent of the promoters’ holdings in Fortis is pledged, and would eventually get sold to a new investor. The company’s inconsistent model of growth and an absence of consistent leadership, coupled with its current spate of lawsuits and alleged malpractice, means that restoring a reputation the Singh family built over the generations may be the hardest thing to pull off. The good news is this. The brothers are here in India to defend their position, explain their actions and perhaps justify their stand, if ever there was one.

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