Kiran Stacey in New Delhi

The Singh brothers, the Indian businessmen who once ran Ranbaxy Laboratories, have lost control of their business empire after being accused of siphoning off tens of millions of dollars from their biggest companies.

Malvinder Singh and Shivinder Singh have ceded most of their shares in a range of companies, including Fortis Healthcare and Religare Enterprises, the biggest. They stepped down from both boards this month.

Their retreat comes after Fortis said it had been placed under investigation by Indian authorities following allegations the brothers siphoned off about Rs5bn ($78m) from the company. It also follows accusations by a shareholder of doing a similar thing at Religare, a financial services company.

With the brothers also facing having to make a Rs35bn payment related to their 2008 sale of Ranbaxy, their bankers have claimed almost all the shares they held in their own companies, which had been used as collateral for loans.

This has left them owning a proportion of Religare and Fortis in the “low single-digits”, said their spokesman.

JN Gupta, managing director of Stakeholders Empowerment Services, the shareholder advisory company, said: “The brothers had three major companies — Ranbaxy, Fortis and Religare — and they have left or are leaving all of them. From what we have seen in all three, they never had any intention of running these companies with good governance.”

The brothers came to international attention when they sold their majority stake in Ranbaxy, the pharmaceuticals company founded by Bhai Mohan Singh, their grandfather, to Daiichi Sankyo, the Japanese company, for $4.7bn. It was at the time the largest purchase of an Indian listed company.

The deal began to unravel almost immediately, however, when the US Food and Drug Administration began a series of regulatory actions against the company, forcing Daiichi to write down $3.7bn from the investment within six months.

Daiichi eventually sold Ranbaxy to Sun Pharma, another Indian drugmaker, but is still pursuing the Singhs for damages, having accused them at a Singapore international tribunal of concealing and misrepresenting facts.

Last month, the Delhi High Court upheld a 2016 judgment from that tribunal ordering the brothers to pay Daiichi Rs35bn.

The pair have denied the allegations and say they are considering appealing the tribunal’s ruling. But even so, they announced this month that they would step down from the boards of Fortis and Religare.

In the case of Fortis, they said they wanted “to enable and empower the board to guide the company’s future without being hampered by any possible impact from the Daiichi judgment”. For Religare it was “to protect the interest of the company and stakeholders”.

Just one day after their resignations from Fortis, however, further allegations emerged from two different sources.

First, Siguler Guff, the private equity firm whose Resurgence fund owns 6 per cent of Religare, filed a case in the Delhi High Court alleging the company fraudulently provided loans to the Singh brothers themselves. The lawsuit alleges there has been “siphoning” of assets.

The brothers have denied the allegations, calling them baseless.

Second, a report published by Bloomberg alleging that Fortis had in July 2017 loaned Rs4.7bn to smaller companies that were then taken over by the Singhs. The report said that while the money had been listed as cash on Fortis’s balance sheets, it was actually under the brothers’ control.

Fortis said the loans were made “in the normal course of treasury operations”. The brothers released a statement saying: “We will not shy away from any and all processes, questions, clarifications that need to be addressed; and we will provide all co-operation to ensure that the truth comes forth.”

The company has not still not released its second-quarter results, which were due to be filed by November 14. Reports have suggested Deloitte, its auditor, has refused to sign off on the accounts until the loans to the Singh brothers have been accounted for or repaid, but the company has denied this.

The ownership of Fortis and Religare is in flux after Indian banks claimed most of the brothers’ holdings.

Despite the flood of Fortis shares hitting the market as the banks have then sold them off, however, the company’s share price has risen 15 per cent since the beginning of the month from Rs139 to Rs160 on Monday, while those in Religare have jumped almost 40 per cent, from Rs43 to Rs59.45.

In part, analysts say the rally is based on the feeling that without the founding family, the companies will be free to pursue more independent strategies.

“Previously there was a lot of uncertainty as to how the promoters would be dealt with,” said Rohan Dalal, a healthcare analyst at B & K Securities. “But now people are expecting a huge shoot up in Fortis’s shares, since the company does have great assets.”

But if investors thought they had seen the end of the brothers’ involvement in Indian business altogether, they were mistaken.

Their spokesman told the Financial Times: “After resolving the current issues and overcoming the present challenges, the Singh brothers are determined to continue their entrepreneurial journey in India and continue to be a part of the nation-building exercise.”

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