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No green light for IHH pending Fortis investigations on lapses, say external auditors
IHH Healthcare on Monday said that the company's external auditors, KPMG, have said that they cannot determine if there are any regulatory non-compliances and additional adjustments or disclosures which may be needed for the audit report, as a result of further findings from ongoing investigations at Fortis Healthcare.
IHH Healthcare acquired Fortis Healthcare and its subsidiaries last November. Prior to the acquisition, an investigation report by an independent external legal firm was submitted to the former Fortis board, relating to systematic lapse and override of internal controls.
Findings showed the placement of inter-corporate deposits and existence of possible related parties connected with former controlling shareholders of Fortis. KPMG said these may require "appropriate reassessment" by Fortis Group on the claims from, or transactions with, such parties.
The Fortis Group had also started querying the management of the impacted entities regarding the matters investigated by the external legal firm.
In addition, there are ongoing investigations by the Securities and Exchange Board of India (SEBI) and the Serious Fraud Investigation Office, Ministry of Corporate Affairs of India. Late last year, SEBI issued interim orders which said that certain transactions were structured by some entities which appeared fictitious and fraudulent in nature, resulting in diversion of funds by former controlling shareholders of Fortis.
KPMG said in its independent auditors' report: "Due to the ongoing process of the various inquiries/investigations..., the external auditors of Fortis are unable to determine if there are any regulatory non-compliances and additional adjustments or disclosures which may be necessary as a result of further findings of the ongoing or future regulatory/internal investigations and the consequential impact, if any, on the consolidated financial statements of Fortis.
"Any consequential adjustments may be recorded either as adjustments to the assets acquired, and liabilities assumed in the acquisition which will have an impact on the provisional goodwill recognised by the group on acquisition of Fortis under the purchase price allocation exercise, or as post-acquisition adjustments to be recognised in the financial statements of the group in the period the adjustments are known."
But besides these matters, KPMG qualified that "the accompanying financial statements give a true and fair view of the financial position of the group and of the company...and of their financial performance and their cash flows for the year".