Fortis Healthcare forensic audit overhang seen as neutral to operations and growth

Investment View and Audit Overhang

ICICI Securities’ September 6, 2026 company update on Fortis Healthcare retains a BUY recommendation and an unchanged target price of Rs 1,075. The broker expects the Delhi High Court-ordered forensic audit to create a near-term overhang on the Fortis Healthcare stock price, while remaining operationally neutral.

The Delhi High Court accepted Daiichi Sankyo’s demand for an audit on August 31, 2026, and appointed S Ramanand Aiyar & Co to examine Fortis share and fund movements from May 24, 2016. The review includes the Rs 46.66 billion transferred to Religare Health Trust and the Fortis-IHH-RHT Health transaction chain.

Scope and Expected Timeline of the Forensic Audit

The audit will examine the evolution of FHHPL, the erstwhile promoter entity, the subsequent divestment of its shares and assets, and IHH’s acquisition of control in Fortis Healthcare. It will also cover related approvals and filings, the use of investment proceeds for real-estate acquisitions from Religare Health Trust, and the role of Fortis officers, managerial personnel, 17 banks and financial institutions.

ICICI Securities expects the auditor to issue information requests within one month, with the concerned parties required to respond within two weeks. The auditor will then have six months to submit the report, suggesting an overall outcome in roughly seven to eight months. The broker believes this timetable could weigh on the stock in the near term.

Management Assessment and Operational Impact

Fortis Healthcare management stated that the scrutinised transactions largely pre-date IHH’s entry and that the company has complied with applicable laws. Management expects Fortis to emerge clean from the audit. It also noted that a third-party internal review was undertaken in 2019, with the findings submitted in earlier court proceedings.

Management does not expect the audit to affect the Fortis brand, hospital patient inflows, daily operations, expansion plans or financial performance. It expects the financial implications during the audit to be limited to the ongoing litigation, as Daiichi Sankyo will bear the audit cost.

IHH’s Strategic Plans Remain Unbarred

IHH, Fortis Healthcare’s current promoter, has previously indicated its intention to increase its stake from 31 per cent to 51 per cent and merge its privately held Gleneagles hospital chain with Fortis. IHH management clarified that the High Court order does not prevent a fresh capital infusion or a Gleneagles merger, and reiterated that Fortis is its India growth platform.

According to the report, these potential strategic actions are therefore not barred by the audit.

Financial Performance and Forecasts

Net revenue increased from Rs 77,828 million in FY25A to Rs 91,278 million in FY26A, while EBITDA rose from Rs 15,880 million to Rs 20,850 million. EBITDA margin expanded from 20.4 per cent to 22.8 per cent, adjusted net profit increased from Rs 8,460 million to Rs 10,591 million, and adjusted EPS rose from Rs 11.2 to Rs 14.0.

Valuation and Target Price

At the report CMP of Rs 905, Fortis Healthcare traded at 27.8 times FY27E EV/EBITDA and 22.0 times FY28E EV/EBITDA.

ICICI Securities maintains its unchanged Rs 1,075 target price using a sum-of-the-parts valuation. The broker values the hospitals business at 27 times FY28E EV/EBITDA and the diagnostics business at 24 times FY28E EV/EBITDA.

Key Risks

• Regulatory hurdles.
• Higher-than-expected competition.