Dubai: The CEO of NMC Health, Prasanth Manghat, has been dismissed. His role will be taken over by the current Chief Operating Officer, Michael Davis, on an interim basis. The Chief Financial Officer, Prashanth Shenoy, has also been granted extended leave, according to Bloomberg.
Market watchers say they did not see the CEO’s dismissal coming. “It was felt that the problems at NMC Health would be confined to its key shareholders, Dr. B.R. Shetty and the two UAE nationals,” said a source with close ties to the company. “Prashant Manghat was having a brilliant tenure as CEO –NMC Health turned in its best financial performance in 2018.
“For him to be dismissed thus, it means there could be a wholesale change of the senior executive team as well.”
NMC Health, which is listed on London stock exchange, is shortly expected to announce its 2019 results. The market is again expecting a fairly strong set of numbers.
Dr. Shetty, last week, announced he was stepping down as Chairman of the company he founded in the 1970s and built into the UAE’s largest privately-owned healthcare operator. This followed an internal investigation that was launched into Dr. Shetty’s shareholding and whether there were discrepancies between what was officially revealed and the actuals.
“NMC Health should come out with an official statement on the reasons behind Prashant’s dismissal – all stakeholders and the public will require answers,” said a senior healthcare industry official. "Much more detailed than what's been provided."
The problems at NMC Health started out of the blue in the final days of December last. Muddy Waters, a US investment firm, announced that NMC’s balance-sheet was showing gaps and directly pointed the fingers at the management and senior shareholders for not being transparent enough about its workings.
NMC Health initially put out a stout defense against Muddy Waters' charges, while launching an internal investigation. As part of this process that Dr. Shetty was barred from participating in any discussions or decisions taken by the Board of Directors. It was then that Dr. Shetty announced the stepping down as chairman pending the completion of the investigation.
And on Wednesday (February 26), NMC Health said the investigation committee had identified supply chain financing arrangements that were entered into, and "which are understood to have been used" by entities controlled by Dr. Shetty and former vice-chairman and key shareholder Khaleefa Butti Omair Yousif Ahmed Al Muhairi.
Stock’s doing great… for now
Immediately after the Muddy Waters’ revelations, the high-flying NMC Health stock went into a deep dive. (This is a stock that is among the FTSE 100.)
“The stock had reached its bottom on February 7, around the time pointed questions were raised about Dr. Shetty’s continuing role as chairman,” said Hussain Alladdin, Head of Research at GCP, a consultancy. “But since then, the stock price has been on the mend, gaining 30 per cent.
“The announcement that a billionaire-investor (Richard Chandler of Clermont Group) is picking up shares in NMC Health seems to have boosted the value. Chandler is taking a stance against Muddy Waters - so, the NMC Health share still has a lot of positives going for it.
“The upcoming 2019 result announcement could provide another booster.”
In recent weeks, there had been speculation of NMC Health being a prime takeover target. Investment firms were supposedly circling the company, more so after its stock price dive.
From its all-time high on August 10, 2018, the “Stock’s down nearly 70 per cent, but since February 7, there’s the 30 per cent push upwards,” said Alladdin. “Now, if the 2019 results cheer investors, the stock could get another partial lift.
“Of course, if Richard Chandler keeps buying NMC stock, that too should be good news.” (Currently, Chandler has a less than 2 per cent stake.)
Who is Prasanth Manghat?
A chartered accountant by profession, Prasanth Manghat’s move up the corporate ladder at NMC Health was quite the leap. He came on board during a difficult transition period when the reins of the company’s day-to-day operations changed hands from its founder, Dr. Shetty, to someone outside of the family.
During his five years, he built up NMC Health’s strengths in the UAE market, through acquisitions that included specialty health services providers. A big buy was the Al Zahra Hospital, for just over Dh2 billion, in December 2016.
But the peak point for Manghat was the financial results of 2018, when revenues went past $2 billion and net profit came to $251.9 million – both records for the company.
And it was during his time as CEO that “NMC became the ﬁrst Middle Eastern company to feature on the FTSE 100 with a market capitalization of over $8 billion,” according to the company’s website.
“Prasanth Manghat turned NMC Health into a powerhouse performer in the region’s healthcare sector, and he did so without burning up cash and with a pile of debt,” said a banker who has known him through Manghat’s 15-year stint at NMC in multiple capacities.
“It’s unfortunate that NMC Health chose to let him go – the way I see it he cannot be held responsible for any legacy issues at the company and which might have preceded his taking over as CEO.”
Manghat had held titles of Deputy CEO and CFO at NMC, and was also CFO at Neopharma, another company in Dr. Shetty’s portfolio. (Manghat owns a hospital – Avitis - in the south Indian state of Kerala, along with his brother and other family members. Dr. Shetty was one of the main guests at the opening.)