Fortis' Parkway battle: The Khazanah story

The Malaysian government’s fund Khazanah has become more aggressive since last year and is ready to go miles to protect ‘national interests’ from falling in the hands of foreigners—in this case Parkway ending up as unit of Indian-owned Fortis

The control battle for Singapore-listed hospital chain Parkway Holdings Ltd has brought Khazanah Nasional Berhad (Khazanah) to the forefront as an aggressive sovereign fund of the Malaysian government, which so far has remained somewhat under the radar.

Khazanah Nasional, literally translated, means National Treasury. Khazanah is the investment-holding arm of the Malaysian government and is empowered as the government's strategic investor in new industries and markets.

Khazanah is in the news due to its possible control war with India's largest healthcare chain Fortis Healthcare Ltd. Last week, Khazanah, which holds 23.8% stake in Parkway, made an open offer to increase its stake to 51.5% at 3.78 Singapore dollar (S$) per share. Fortis, on the other hand, holds 25.37% stake in Parkway, making it the largest stakeholder in the company.

The journey of Parkway and Khazanah and their relations over the years is quite fascinating and may hold a potential for a Bollywood film.

Fortis, led by the Singh brothers, Malvinder and Shivinder, had bought stake in Parkway from US-based TPG Capital by paying S$959 million. Earlier, in 2005, Newbridge Capital, which later morphed into TPG Capital, emerged as the largest shareholder in Parkway. Newbridge top brass was handling Parkway management.

Soon, Parkway decided to bid for Pantai Holdings Bhd, the other healthcare services provider from Malaysia. In 2005, Parkway bought Pantai shares from the latter's chief executive Datuk Lim Tong Yong. Next year, Parkway emerged as the highest bidder for Pantai, which led to a political storm in Malaysia. Political parties alleged that since Pantai's units held key concessions from the Malaysian government, its control should not fall into the hands of foreigners (in this case Newbridge). Politicians from the ruling political party had said they were unhappy that the concessions-one for health screening of foreign workers and another for the provision of state hospital services-had fallen into foreign hands.

Enter Khazanah to save the day. Khazanah for a start bought 6.6% stake in Pantai through its unit Pantai Irama Ventures Sdn Bhd for an undisclosed amount. At that time, it said that it believes the strategic interests of the nation (Malaysia) will be protected in this manner the commercial interest of Pantai and its investors will also be served with this partnership.

What Khazanah meant by partnership was nothing but its arrangement with Newbridge to run Pantai operations. Under the partnership, both Khazanah and Newbridge formed a special purpose vehicle (SPV), which would hold Pantai stake. However, due to the political heat, Khazanah was made to hold a majority stake in the SPV and it was decided that Parkway management (led by Newbridge) would continue to run Pantai hospitals.

This arrangement started a new relationship between both the fund and the hospital chain in such a way that later Khazanah ended up with a significant (23.2%) stake in Parkway. Using Khazanah's shareholding, Parkway also formed fruitful relations with India's Apollo Hospital Enterprises Ltd. Both Apollo and Parkway together run a hospital in Kolkata. In 2002, Apollo Hospitals bought 50.26% stake in Duncan Gleneagles Hospital for Rs3 crore, which was struggling to get off the ground. It was a joint venture with GP Goenka group.

While the relations between Khazanah, Parkway and Newbridge (TPG) were sailing smoothly, in March 2010, TPG decided to exit Parkway. It sold its 23.9% stake to Fortis, owned by the Singh brothers. Two years ago, the Singh brothers sold their entire stake 34.8% stake in Ranbaxy Laboratories Ltd, India's largest pharmaceutical company, to Japanese Daiichi Sankyo at Rs737 per share. So, money may not be a problem for the Singh brothers if they decided to counter-bid Khazanah's offer to Parkway. (read more )

The real question is whether they would be allowed to do so by the Malaysian government, given that TPG or Newbridge had to broker a mid-way to control Pantai?

Although Khazanah is a national fund owned by the Malaysian government, till last year it was looked as more sober or less aggressive compared with Singapore's state-run funds, Government of Singapore Investment Corp (GSIC) and Temasek. According to media reports, Khazanah was told to progressively divest its non-core assets in order to lure foreign portfolio funds back. Last year Khazanah made a total of eight divestments worth over 3.1 Malaysian ringgit (MR).

However, the fund still lacks real cash power compared to GSIC. Further, Khazanah does not receive a constant cash supply from the Malaysian government, which itself is struggling to cope with a persistent fiscal deficit and has to mainly be dependent on dividend income and gains from stake sales. Following its divestments, Khazanah may have some war chest to do more deals.

At the same time the fund has announced selling of Islamic bonds worth S$500 million to fund its Parkway purchase.

So, the first round of the Parkway battle appears to be won by the Singh brothers with the availability of huge cash and resources to manage more. But the second round may not be that easy for them. They need to keep in mind the Pantai deal and pave a way. There are three options left for the Singh brothers.

Fortis can either spend more and retain control of Parkway or end up as a minority shareholder or can sell its stake to Khazanah and walk away with some more money. 



Fatpipe’s IPO appears pricey

Although there are no strict comparables to Fatpipe, companies like Vakrangee Softwares, Tanla Solutions and Cyberteck System have lower PEs

Chennai-based IT firm Fatpipe Networks India Ltd's (FNIL) initial public offer (IPO) hits the market on 7 June 2010. The company plans to raise Rs49 crore from the issue. FNIL has fixed the price band at Rs82-Rs85 per share. The issue closes on 9 June 2010.

As on 31 March 2009, the company's earnings per share (EPS) stand at Rs6.46. Its price to earnings (P/E) is at 16.11 at the lower end of the price band. Although there are no strict comparables to FNIL, companies like Vakrangee Softwares Ltd (6.86), Tanla Solutions Ltd (6.30), Subex Ltd (15.11) and Cyberteck System and Software Ltd (7.28) are available at a cheaper price.

"The company is bringing the issue at a price band of Rs82-Rs85 per share which will have the P/E multiple of 22-23 on post-issue annualised EPS of Rs3.69 (On the higher band of Rs 85/share). During the 9MFY10 the intangible assets contribute major part of gross block of company which is a cause of concern," stated a research report of Hem Securities.

FNIL reported a total income of Rs45 crore with a net profit of Rs5.20 crore for the nine months ended December 2009. It registered a cash flow of Rs1.21 crore for the same period.

Brickwork Ratings has assigned an 'IPO Grade 2' to FNIL which indicates 'below average fundamentals'.

A majority of FNIL's revenue comes from the US and may face risks of foreign exchange fluctuations. The company is planning to utilise the proceeds to expand the product line, to establish 16 new marketing offices across the globe including additional offices in the USA, for acquisitions and to meet its working capital requirement. Fatpipe is eyeing to expand its operations to China, Singapore, South Africa, Kenya, Nigeria, Argentina, Belgium, Germany, France, Eastern Europe and Australia.

The company provides global corporations and government offices with technology that increases the security and reliability of wide area networks (WANs), corporate extranets, virtual private networks and all last-mile Internet connections, including wireless connectivity. The company holds patents on a technology called "Router-Clustering", which enables customers to obtain highly redundant and fast Internet/WAN access.






Bob Smith

7 years ago

The company earned a net profit after tax of Rs 399.37 lacs for the year 08-09, which was transferred to General Reserve. The balance at the end of the previous year in General Reserve was Rs 49.97 lacs. If you add, the profit transferred this year, to this figure, it should be Rs 449.34 lacs. Simple arithmetic. However, as per the statement of accounts as furnished in the DRHP, filed with SEBI, the figure is Rs 2103.04 lacs. For the difference, the corresponding entry shown in the balance sheet is Intangible assets.

DO NOT BUY!! Failure to report multiple litigation as well as challenges to its patents. Currently under federal investigation of its labor practices. Financials would not likely stand up to a US SEC audit, hence the reason to change from a U.S. company to an India company and run the IPO there. Numbers are perceived to be misleading and inaccurate.
Dr.Raghula Bhaskar and Ms Sanchaita Datta are the promoters of the company. They take in excess of $400,000USD of income on a VC supported venture. They claim profit, but no listing of dividends to its investors. Interesting to note that they are husband and wife with a combined control in excess off 33% If you scrutinize some of the other ventures such as their India based programmers company BOX, you will find the company is listed as being based out of their home. Makes one wonder whether the VC's are even aware they may have financed these other entities. This begs to question: Is this IPO merely a sham to pay back the VC who by now must be asking...where did the money go?

Bottom Line: Fat Pipe years ago was at the right place at the right time. However, it has failed miserably to stay up with the ever-changing technology and marketplace. Other companies, new technologies, have sprung up bringing with them new technologies and innovation. Sorry Fat Pipe, you are OBSOLETE!!! Do you remember Iomega with the zip drive...? IOmmm who? A bet in Las Vegas would be a better risk

James Smith

7 years ago

Bad Buy !! Too High, None disclosed litigation, Patent Challenge, Principals are Husband and wife and they seem to want to conceal that fact. wonder why, maybe because they have 33.5% Don't believe numbers would hold up under scrutiny
Hear what others have to say:


•The Company operates in a highly competitive environment.
•The majority of the operations of the Company are carried out from its branch offices in the USA. Risks related to FEMA.
•The funds requirements are not appraised by any Bank or Financial Institution.
•The Company proposes to acquire businesses/companies located outside India, the company is yet to identify companies/ businesses to be taken over.
•The Company has not yet tied-up for debt component for enhanced working capital needs.
•The Company has not paid dividend in the past.
•The global operations expose the Company to complex management.
•The combined employee strength is 120 and 50% are in sales and marketing.
•The average cost of acquisition of Equity Shares by the Promoters is at Rs 10/-
• Receivables out standing as on 30-09-09 are at Rs1269.69 lacs, against a turnover of Rs 2958.68 for the same period.


EPS for the year FY 10-11 is expected to be Rs. 5.50 per share. At the lower end of the price band of 82, PE multiple works out to 15 times. Similar companies in IT networking equipments / manufacturing are presently ruling at PE of around 8 times. Valuation is very much stressed . There are no project to be implemented. Structured IPO. The company has no dividend payment history. Keep 1000 km distance from the issue.

Another Emmbi in the making. Investors are advised to stay away from the issue.

SEBI’s effort to use banks to popularise online platforms unlikely to work

SEBI plans to enlist banks to help boost sales of mutual fund schemes, especially the schemes of mutual funds sponsored by banks. However, this move may not work

The much-hyped online mutual fund platforms on the Bombay Stock Exchange and the National Stock Exchange have mostly turned out to be a no-show. Now, the Securities and Exchange Board of India (SEBI) is making another attempt at boosting the flagging sales of mutual funds by this route. It is trying to rope in banks to give a fillip to the volumes on the online platforms. But this may not work due to a rule by the Reserve Bank of India.

As reported by Moneylife yesterday, the market watchdog has called a high-level meeting with bank-sponsored MFs and their respective retail product heads of the banks. The meeting is expected to be attended by the retail product heads of banks like IDBI Bank, HSBC Bank, Kotak Mahindra Bank, ICICI Bank, HDFC Bank and Axis Bank which also have asset management companies which may be represented by their CEOs. At the meeting, SEBI is likely to pressure banks into selling mutual fund products by a variety of means, including using the exchange platform. All these groups have their own large stock-broking firms.

But the current Reserve Bank of India (RBI) guidelines do not allow banks to set up broker terminals inside their premises. This was confirmed by a source from ICICI Bank. Most importantly, SEBI has no jurisdiction in the banking space and it is unlikely that banks will heed its call without the go-ahead from the regulator, RBI. Therefore, SEBI's attempts at having banks push fund sales through the broker terminal route may turn out to be infructuous.

The SEBI move makes sense on paper. Banks have the widest and deepest distribution network of financial products and if any segment can ensure large nationwide distribution it is the banks. Speaking about the development, a spokesperson from the Indian Banks' Association (IBA) said, "Many banks already have the systems and distribution platforms in place. It will be another business opportunity for the bank. If they find it worthwhile they will do it." Another senior official from IBA said, "As banks have a wider reach SEBI might be planning to use that channel to increase the turnover. Banks already have a system of cross-selling of financial products." But having a network is one thing. Making it work for a particular product is another matter.

By dialling banks' helpline, the market regulator is now signalling that it is ready to explore every avenue to push fund sales after net inflows into equity funds started falling from August 2009 when as part of a series of regulatory changes SEBI banned entry load and upfront commissions. This effectively eliminated the well-entrenched incentive-based distribution system of selling mutual funds. With commissions eradicated, mutual funds have found distributors deserting their products in favour of better revenue-yielding products like Unit-linked Insurance Plans (ULIPs).

When fund sales flagged, SEBI probably felt that it needed to take innovative initiatives to push mutual fund sales. One of its brainwaves was offering a system of buying and selling mutual funds through broker terminals. This resulted in the creation of the Bombay Stock Exchange's (BSE) StAR MF platform and National Stock Exchange's (NSE) NEAT Mutual Fund Service System (MFSS) late last year. This was again a logical move because stockbrokers have a wide network. But there is a fundamental flaw in the idea of getting stockbrokers to sell mutual funds. Brokers make money by getting customers to trade frequently and have little interest in selling mutual funds, the sales of which do not fetch large volumes. Not surprisingly, both platforms have struggled to make any significant inroads, as Moneylife had previously reported. (Read here:

Now SEBI has come out with one more trick by getting banks to push mutual fund products especially those of funds belonging to the same group. If the stockbroker network for banks does not work, SEBI will have to get national distributors to try other means to sell funds.




jignesh n vyas

7 years ago

Sebi is totely faild to incress MF equity investment. This rules demage Small investor. MF is push product. IFA are punished for bluander big disturbutior fo miss salling. Sebi reitroduce up front commision and after see inflow of applacation. jignesh.

Dillip kumar swain

7 years ago


Ranjan D Gupta

7 years ago

SEBI's attempt to increase sell through Bank related Mutual Funds will result in a poor show.I am surprised to understand that SEBI has no proper knowledge about the environment of investment in India.In India products like Insurance, Mutual Funds.Pension require to be sold, not being bought with enthusiasm.SEBI can draw a clue from the fact that after introduction of "no entry load" on direct investment by investors only 3-4% of the investments came from direct investors.Investors will run to the Bank to take a Fixed Deposit or lined up in a queue in Post office to purchase NSC or Kishan Vikas Patra but not come forward with the same aggresiveness to invest in Mutual Fund.
Banks can request their customers to open Demat account but not force them to do it.


7 years ago

rather than reiewing its own decision of august 2009.......

SEBI's action are trying to say everything and everyone else is wrong in mutual fund industry......and only SEBI people is right....

its high time SEBI reviews its own decisions regarding mutual funds rather than trying one trick after another....


7 years ago

Time and again SEBI forgets the most important point that IN INDIA MUTUALS FUNDS ARE SOLD NOT BOUGHT. MF's are still a push product and not directly sought by the investing community. So the link will continue to be the so called MF Distributors/IFA's. Allow them to function and give them a level playing ground.

Hemant Beniwal

7 years ago

Do you think these trainees will be AMFI certified?

"ICICI Prudential, for instance, plans to hire 50 trainees to support its existing distribution network. “The bank has a strong branch network and we are trying to leverage on that. We are also looking to hire about 50 people as trainees to work in co-ordination with our existing distribution network,” said Mr Raghav Iyengar, National Head-Sales and Distribution, ICICI Prudential.

Some of the AMCs have also been hiring B-school graduates as interns for marketing their products. “The fund houses have been approaching us and are ready to send their interns to work with us to boost the sale of mutual funds,” said the head of an investment advisory services company in the city."


7 years ago

Mr. FM your NPS Lonch last year Please check volume Your NPS account and also check after NO Brokerage what mutual fund selling volume


7 years ago

What about the channel partners, there is no record of an transactions done by a channel partner on behalf of an AMC with an investor. Only their commission is blocked till date. But what are the efforts done by the channel partners to collect the application forms and details from investor. How much percentage has been sorted out till date. Any statistics???


7 years ago

Mr.Finance Minister, wake up. See the damage caused by idiotic decisions of SEBI. If the government cannot provide employment to people, let it not ruin thier livelihood. We IFAs are been punished for the blunders committed by Big Distributors of mis-selling and churning. Dont Post Offcies pay upfront ? What is wrong with this method ? Has the Mutual Fund industry not grown substantially from 2001-2009 ?An IFA gives services from investment cheque to redemption cheque. To put back Mutual Fund Investments on track,please REINTRODUCE Upfont Commission and see the sales soaring.

V N Kulkarni

7 years ago

6 months back mr.bhave was worried about lack of advisory to investor.
Mr.bhave , can you explain what advisory a BOLT operator(90% of them are day trader/speculator) is giving while transacting mutual fund transaction over online platform.

jignesh n vyas

7 years ago

It is very bad time foy MF industry. If you not given up front commision to advisior . so very difficult to sell Mf. If you tick in form how much commision dicided between agent investor. This is right stap. No body given services to small sip and small applacation. Also on line for Mf advisor.


7 years ago

This is another MOVE which clearly shows that SEBI has lost its mental power-and it is trying to heal stomache pain by a mental disorder pain killer-infact they are not ready to accept their series of failures of mental stability-these intelligent guys who have never dealt with a retail investor are proving them selves as big FOOLS-

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