B.R Shetty's NMC Healthcare lands in troublesome Muddy Waters Report

Carson Block’s investment firm, Muddy Waters issued a report criticising NMC Healthcare’s accounts and disclosed a short position of Indian origin billionaire businessman Bavaguthu Raghuram Shetty who is the founder of NMC Healthcare and Finablr.

Crux of the Matter

B.R Shetty, once a typical jet-setting, cash-blowing billionaire with private jets, vintage cars and condos in Burj Khalifa, resigned as NMC’s chairman on February 16. On December 10, his stocks were valued at $2.4bn but only a week later Carson Block came along with the damning report. Muddy Waters’ report brought forward the firms’ complex share arrangements which cast doubts on Shetty’s net worth.

BRS Ventures Investment which holds most of Shetty’s assets does not report consolidated financials, preventing a complete analysis of his net worth. Shetty’s holdings in Finablr and NMC are worth $885mn, but it now might be reduced to just a fraction of that depending on his borrowings.

Muddy Waters report hints at potential overpayment for assets, inflated cash balances and understated debt. On Shetty’s request, the law firm Herbert Smith Freehills launched a review of Shetty’s holdings.

According to Shetty’s filings of this month revealed that he had pledged a quarter of his NMC stake against loans with First Abu Dhabi Bank and Zurich-based Falcon Private Bank. Also, two other shareholders may own half his stake. Another lender Al Salam Bank Bahrain already sold some of the shares to enforce security over a loan and on February 18 NMC said that First Abu Dhabi Bank sold another chunk earlier this month.

Complicating the matter, Shetty pledged a batch of NMC stock in 2018 as part of an equity collar arrangement with Goldman Sachs that uses options to limit the effect from share moves. In January 2020 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.

I didn’t anticipate NMC’s shareholding drama. I wouldn’t have been able to predict that we’d get these bizarre disclosures about unclear share ownership coming out of the company.

– Carson Block

NMC disputing claims made by Muddy Waters, have hired former FBI director Louis Freeh to conduct an independent review of the short-sellers allegations. Shetty’s other assets which include a catering company, a waste-management firm and pharmaceutical business Neopharma were in the early stages of planning for an initial public offering (IPO).

Curiopedia

Bavaguthu Raghuram Shetty is an Indian-born billionaire businessman and the founder of a number of companies like Finablr and BRS Ventures based in the United Arab Emirates. He is founder and chairman of Abu Dhabi-based NMC Healthcare, and chairman of UAE Exchange. He immigrated to the UAE in 1973. After working as the country’s first medical representative, he founded New Medical Centre Health (NMC) in 1975 to fill the need for personalized, cost-effective healthcare accessible to all. NMC is now the largest private healthcare provider in the UAE with over four million patients annually across 45 facilities spread over 12 cities and 8 countries. More Info

Carson Block is a short-seller and the founder of Muddy Waters Research. Block is known for documenting and alleging fraudulent accounting practices in publicly traded Chinese companies. He holds a law degree from Chicago-Kent College of Law. In 2011, he was ranked as a 50 Most Influential Thinker by Bloomberg Markets. More Info

Muddy Waters Research LLC is a privately held due diligence based investment firm that conducts investigative research on public companies while also taking investment positions that reflect their research. The firm has exposed accounting problems and fraud at several companies, primarily in China but also in other countries in Asia, Europe and North America. The firm is best known for spotting fraud at Sino-Forest Corp, a Canadian-listed Chinese company whose stock fell 74% before it eventually filed for bankruptcy protection in March 2012. In January 2015, the firm raised an initial $100 million for its investment strategy. More Info

Nirav Modi Threatens to Commit Suicide if He is Extradited to India

Nirav Modi, fugitive businessman has been behind bars at Wandsworth prison since March 19 in connection with Rs 13,500 crore Punjab National Bank (PNB) money laundering case. UK court rejected his fourth bail plea on 6th November.

Crux of the Matter
  • Nirav Modi applied for a fresh bail plea on grounds of ‘depression’ and he also offered to double the security to the court from earlier 2 million pounds to 4 million pounds.
  • He also promised a privately-paid guard service to ensure constant monitoring with electronic tagging.
  • After his fourth bail plea got rejected he threatened to commit suicide if he was extradited to India.
  • Modi’s extradition trial is scheduled between May 11 and 15 2020. Until then he is supposed to be produced via video link before a court every 28 days until the trial begins.
  • His defence team informed court of an extortion attack where two inmates entered his cell and kicked him to the floor and punched him in the face.
  • Court was also extremely critical about the leaked confidential health reports of Nirav Modi.
Curiopedia

The Punjab National Bank Fraud Case relates to fraudulent letter of undertaking worth ₹11,356.84 crore issued by the Punjab National Bank at its branch in Fort, Mumbai; making Punjab National Bank liable for the amount. The fraud was allegedly organised by jeweller and designer Nirav Modi. Nirav, his wife Ami Modi, brother Nishal Modi and uncle Mehul Choksi. Nirav Modi and his family absconded in early 2018, days before the news of the scam broke in India. Nirav Modi is currently in the United Kingdom and is seeking political asylum in Britain though the Indian government has officially asked for his extradition. Modi is on the Interpol’s wanted list for criminal conspiracy since February 2018. More Info

Chidambaram Gets Judicial Custody till Nov 13

Struggling in the INX Media Case, former Union Minister P Chidambaram has been ordered by Delhi High Court to be put in judicial custody for 14 days. Special Judge Ajay Kumar Kuhar rejected Enforcement Directorate’s plea to give another day for interrogation. Sighting his health issues P Chidambaram has been allowed medicines and home-cooked food in Tihar jail.

Chidambaram Summoned by ED for Questioning

Former Union Minister P Chidambaram has been summoned by the Enforcement Directorate in a money-laundering probe in an alleged aviation scandal during UPA government. Chidambaram is also currently embroiled in 2 other corruption cases.

Crux of the Matter
  • ED is investigating losses suffered by Air India because of an alleged aviation scam.
  • Ex-aviation minister Praful Patel was questioned about permissions granted to foreign airlines and purchase of 111 aircrafts in his tenure.
  • A lobbyist Deepak Talwar has been arrested in connection with this case earlier this year.
  • Chidambaram is also currently being investigated for alleged scams in INX Media case and Aircel Maxis case.
Curiopedia

UPA Government scams – During the tenure of the United Progressive Alliance from 2004 to 2014, the government was inundated with multiple corruption charges and scams. Some of the major scams were:

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Curated Coverage
  • The Hindu – ED summons Chidambaram in aviation scam PMLA case
  • The Financial Express – Fresh trouble for P Chidambaram, ED summons ex-Union minister in aviation scam
  • The Indian Express – Air India scam: ED summons Chidambaram for interrogation