UAE Exchange branch
Finablr's Board of Directors will set up an independent investigation into Finablr, the holding company that owns UAE Exchange. Picture used for illustrative purpose. Image Credit: Gulf News Archive

Dubai: Two leading business houses in the UAE are having second thoughts about bidding for a stake in Finablr, the financial services company owned by Dr. B.R. Shetty, the UAE based Indian billionaire.

This - in the midst of an 80 per cent fall in Finablr’s share price - follows Tuesday’s revelation that NMC Health, Finablr’s sister company, was carrying an additional $2.7 billion in debts that was never reported before. This raises NMC’s total debt position to nearly $5 billion, from $2.1 billion.

On Thursday, the Finablr Board of Directors confirmed it plans to launch an internal investigation at Finablr, along the lines of what was done at NMC Health. That then led to the ouster of NMC’s CEO - Prasanth Manghat.

The market believes that a “sizeable stake sale ” in Finablr is what potential investors are interested in. There are some who reckon the company might consider removing Dr. Shetty and family from the Finablr board or even go private.

The skeptics however hold a different opinion: “NMC Health and Finablr are two separate companies… but they essentially have the same principal shareholders, including Dr. Shetty,” said a top official at the Abu Dhabi based company that had an interest in taking a Finablr stake. “The two companies also had the two Manghat brothers – Pramoth and Prasanth - at the helm of affairs until Prasanth got fired as the NMC CEO.

“We will want further clarity about how separate NMC Health and Finablr are. No one likes being caught up by a surprise about huge debts in a way the NMC board got – certainly not when they are around $3 billion. And NMC’s current board of directors had absolutely no clue about it until this week.”

Another company said it has decided not to bid at all for the Finablr stake. It was particularly interested in acquiring the UAE Exchange Centre network, which has a wide reach in the Gulf and India.

“There would have been synergies with our own money exchange operations,” said an official there. “But now, it is best to hold back.”

Full faith

Interestingly, Finablr had issued a statement on London Stock Exchange where it reposed complete faith in its current management. This is what it had to say on March 9: “The Board confirms its full support for the Company’s Executive Management team and commends their actions to maintain business operations and resilient performance in challenging circumstances.”

Finablr listed on LSE in May last year. It is not known whether the statement was issued after any internal audit/investigation was conducted of the company’s books and operations. Finablr has debts of $300 million plus on its books – “or, so it seems as of now”, cautioned a banker.

The very next day, on March 10th , NMC Health, also listed on London Stock Exchange, issued the statement about finding out about the additional $2.7 billion in debts. It also said, “The Board (of Directors) believes that some proceeds may have been utilised for non-Group purposes.”

According to another banker, the perception in the UAE is that NMC Health and UAE Exchange Centre/Finablr are one and the same. “There are pictures of Dr. Shetty at NMC hospitals and UAE Exchange Centre branches,” he said. “The question then becomes are NMC’s problems an isolated one? Or will it impact other interests of Dr. Shetty?”

Cut to size

The latest Finablr statement also gives the current shareholding of Dr. Shetty and his son, Binay Shetty.

“Dr. Shetty and Mr. Binay Shetty are presently the beneficial owners of 459,579,041 shares, representing 65.65 per cent of the Company,” it said. “On 24 January 2020, the Company announced that shares held by BRS Investment Holdings 1 Limited, representing 56.03 per cent of the shares, had been pledged as security for borrowings.” (BRS Investment is the holding company for Dr. Shetty’s assets.)

Operational issues?

There is no doubt that UAE Exchange Centre is the crown jewel in Finablr’s holdings. The former has a significant share of the remittance business in the UAE, and also handles a sizeable share of corporate transactions.

Market sources say that in the last fortnight or so UAE Exchange Centre branch officials have been telling customers that there are some “technical issues” on transactions to destinations other than India. In particular, transactions to the US were having delays.

It is not known whether this was a temporary glitch and since rectified.

“The prize asset in any Finablr stake sale is UAE Exchange Centre – but prospective investors will want greater transparency,” said a banker.

“However much they want it otherwise, the fortunes of NMC Health and UAE Exchange House/Finablr may still be tied together.”