br shetty
Dr. B.R. Shetty, founder of NMC Health, will not be able to attend board discussions on the company's future for the moment. Image Credit: Gulf News Archive

Geneva: NMC Health Plc, the operator of the biggest network of hospitals in the UAE, said its chairman will be removed from board discussions after he said he may have misreported the size of his stake.

Its Chairman, Dr. B.R. Shetty, is conducting a legal review into the size of his stake, NMC said Monday. The company is asking its main shareholders for clarity on whether they have pledged any of their holdings as collateral. The stock fell 46 per cent last week on speculation major shareholders faced margin calls and were being forced to sell the shares.

It has been reported that NMC had received an offer for 2 billion pounds. These approaches were from private equity firms. The hospital operator said Kohlberg Kravis Roberts & Co. and GK Investment made "preliminary" approaches.

Monday’s disclosures compound the turmoil surrounding NMC, which has been the target of short seller Muddy Waters Capital llc since December. The firm alleges that the company manipulated its balance-sheet and inflated the prices of assets it purchased. NMC, which denied the allegations, said the board has asked Shetty and Vice-Chairman Khaleefa Butti Omair Yousif Ahmed Al Muhairi not to attend any board meetings until the size of their stakes is clarified.

NMC also said the board will make a decision about whether Shetty and Butti should remain as company directors.

Review on to pin down Shetty's shareholding

By Justin George Varghese, Staff Reporter

Dr. B. R. Shetty said a "legal review" is being carried out to verify stakes that belong to him, his family members and their holding companies in NMC Health.
This suggests that the holdings of NMC’s top shareholders - Shetty as well as those belonging to Saeed Bin Butti and Khaleefa Bin Butti - have been "incorrectly reported historically", NMC said.
NMC has asked BR Shetty and Khaleefa Butti to absent themselves from further board discussions until clarification of these matters - and pending a Board of Directors' decision about their ongoing roles at the company.
This comes after two of Saeed Bin Butti and Khalifa Bin Butti sold stakes worth 375 million pounds ($491 million) at a huge discount in order to cover debts linked to the shares.
The well-known Abu Dhabi investors - officially known as Saeed Mohamed Al Qebaisi and Khalifa Butti Al Muhairi - "sold" a combined 15 per cent stake in the UAE’s largest private healthcare provider at 12 pounds a share, a discount of a fifth to where the shares were trading on Tuesday.
It is not known who has since acquired these shares. NMC has not made any official statement in this regard to date.
Meanwhile, another Shetty owned vehicle, Finablr, said in a statement that a committee of independent directors are reviewing the alleged arrangements between Shetty and the shareholders in the payments firm, which is also co-chaired by the Indian billionaire.
NMC Health investors, which were earlier caught off-guard when the two key shareholders sold a chunk of their holdings – triggering a steep sell-off, cheered the latest announcements.
NMC shares were up 8.86 per cent in early trading Monday.

December turmoil
NMC, which has been has been undergoing a review of its accounts, saw its London-listed shares more than halve in mid-December after the hedge fund announced that it had a bet against the stock.
The shares gained some reprieve after the company announced an independent review of its books, but still ended the year down around 34 per cent.
Though NMC did confirm some aspects of Muddy Waters’ characterization of its debt - notably that it uses "reverse factoring" which is reported in trade payables and uses extensive overdrafts - the firm dismissed the report as a whole as “false and misleading”.

In December, American short-seller Carson Block’s Muddy Waters raised “serious doubts” about the company’s accounts, questioning the group’s asset values and cash balance.

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Muddy Waters questioned NMC’s use of certain financing methods that do not get recorded as debt in its balance sheet. In response, NMC said these facilities are “commercial matters” for its suppliers, adding it has never told investors that its suppliers “have not used, or are not using” these techniques.

The US short seller also accused the company of “deliberately” understating its debt by about $320 million for the fiscal 2018 year by incorrectly reporting leases associated with its Aspen Healthcare acquisition.

Stock gain
The NMC Health stock gained as much as 18 per cent after it said Kohlberg Kravis Roberts & Co. and GK Investment made highly preliminary approaches. The comment came in response to a report that said KKR held talks with the company in recent weeks about a 2 billion pound takeover but couldn’t agree on the price.