NRI business icon B R Shetty set to lose control over his business
21 February 2020
Bavaguthu Raghuram Shetty, the UAE-based Indian businessman who helped found companies, including hospital operator NMC Health Plc and financial services firm Finablr Plc, saw his stakes in the firms plummet after over-leveraging on these assets.
On Sunday, Shetty resigned as chairman of NMC Healthcare after it was revealed that his stakes in the public companies spanning education, hospitality and one of the world’s oldest tea companies, were only a fraction of the $2.4bn fortune that he was seen to be sitting upon.
The revelations came after Carson Block’s investment firm, Muddy Waters, issued a report criticising NMC’s accounts and disclosing a short position. Further scrutiny by Muddy Waters helped shed light on his complex share arrangements that cast doubts about Shetty’s net worth.
It is now alleged that Shetty’s holdings in Finablr and NMC are not worth $885m, but may now be just a fraction of that, depending on the size of his borrowings.
Shetty had pledged a quarter of his NMC stake against loans with First Abu Dhabi Bank and Zurich-based Falcon Private Bank, even as two other shareholders are seen owning half of his reported stake.
Another lender — Al Salam Bank Bahrain — has already sold some of those shares to enforce security over a loan for Shetty, and First Abu Dhabi Bank sold another chunk earlier this month, according to NMC.
A spokesman of Shetty said the India-born businessman had engaged law firm Herbert Smith Freehills to conduct a review of his holdings, but declined to comment further until the analysis is completed.
Muddy Waters, in its 17 December report on NMC, had hinted at potential overpayment for assets, inflated cash balances and understated debt.
Shares of the UAEs’ biggest private health-care provider have since plunged 67 per cent, and the firm is now the focus of takeover speculation. The sell-off also spread to Finablr, whose stock has tumbled 64 per cent.
NMC has disputed Muddy Waters’s claims, and the company hired former FBI director Louis Freeh to conduct an independent review of the short seller’s allegations.
Meanwhile, local regulators “are making inquiries with the relevant parties,” a spokesperson for the UK’s Financial Conduct Authority said.
Shetty and his advisers are investigating details of the sales as part of their legal review, according to filings.
Shetty also pledged another batch of NMC stock in 2018 as part of a so-called equity collar arrangement with Goldman Sachs Group Inc that uses options to limit the impact from share moves. Last month, he also pledged most of his stake in Finablr to refinance a loan from the company’s takeover of foreign-exchange firm Travelex for about $1.2bn.
BRS Ventures Investment, the UAE-based holding company for most of Shetty’s assets, doesn’t report consolidated financials, which prevents a complete analysis of his net worth. His other assets include a catering company, a waste-management firm and pharmaceutical business Neopharma, which four months ago was in the early stages of planning for an initial public offering.
Shetty founded NMC in 1975 after moving to Abu Dhabi from his native India. He created Finablr two years ago to consolidate his financial brands before listing it on the London Stock Exchange in 2019.