BR Shetty: The Staggering Rise and Colossal Fall Of A Billionaire

By SM.26 Apr, 2020




In mid-2018, during a media interaction, Bavaguthu Raghuram Shetty remarked: “If I don’t have one problem a day, that’s not a good day for me. I should have a problem, solve it and then feel satisfied.”

One must, as the adage goes, be careful about what one wishes for. At the time of the interview, there was not a cloud on the horizon for the Abu Dhabi-based billionaire-founder of NMC Health, then the biggest private healthcare company in the United Arab Emirates (UAE). Its 2012 IPO in the London Stock Exchange — the first for an Abu Dhabi-based company — was a blockbuster, raising £117 million. In 2014, he acquired UK-based forex major Travelex, paying £1 billion. A sprawl of smaller businesses that he owns across hospitality, education and pharma were all doing well. In 2017, he said he would produce the most expensive movie ever made in India — a feature based on the epic Mahabharata. Budget: Rs 1,000 crore.

Shetty embodied the ultimate immigrant dream in the Persian Gulf — a man from coastal Karnataka who arrived in the oil-rich West Asian deserts in the early 1970s with $8 in his pocket and went on to create a personal fortune estimated by Forbes to be $4.2 billion in 2018.

Sheikh Mansour bin Zayed al Nahyan, UAE deputy prime minister and owner of the Manchester City football club, is the patron of Centurion Investments, once NMC’s top shareholder. Not only had Shetty achieved fabulous success, he was also paying it forward. He had signed up to be part of the Giving Pledge — a campaign by Bill Gates and Warren Buffett — committing to donate to charity at least half of his personal fortune.

And therefore, when he gave that interview, there was no reason for anyone to suspect that his empire could come crashing down. Least of all, because someone handling the Twitter handle of a boutique research firm in California decided to be a tease.

Chinese Proverb On August 6, 2019, Muddy Waters teased on Twitter a report on a UK-based investment firm it was going to release the following day: “Muddy Waters is now in a blackout period until tomorrow 8 am London time when we will announce a new short position on an accounting fiasco that’s potentially insolvent and possibly facing a liquidity crunch. Investors are bulled up about this company, we are not.”

Muddy Waters (named after the Chinese proverb, “Muddy waters make it easy to catch fish”, not the blues singer) is a controversial research firm run by short-seller Carson Block, who has made a name exposing accounting frauds in Chinese public companies. He shot to fame in 2011 when he issued a report accusing Canada-listed Chinese plantation operator Sino Forest of overstating its timber holdings. The stock tanked 78% in days, and billionaire hedge fund manager John Paulson lost $110 million. That’s when Wall Street first took note of the new kid on the block. Short-sellers like him bet on the price of a stock going down. Block typically takes a short position on a stock before releasing a report and makes money when a stock gets hammered. The conflict of interest is clearly declared on its website. His line of work generates such heat that he doesn’t disclose his location and has spoken about receiving death threats.

But on that day in August, when Muddy Waters tweeted that it would release a report about an accounting fiasco at a London-listed firm, Block noticed an interesting development: the stock of NMC Health dropped. “We had tweeted in advance an innocuous comment about our intention to initiate a campaign the next day on an unnamed London listed firm. NMC happened to drop significantly on the tweet. That’s a pretty strong indication that the market knows something isn’t right at the company, so we took a look….” Block told a magazine in an emailed response.

What they found was not pretty.



House of Cards
When Muddy Waters released a damning report four months later, on December 17, it set off a chain of events that has stunned UAE.

NMC Health, the first company Shetty started, stands accused of falsifying accounts and faces charges of fraud. A private investigation revealed it might have understated its debt by $4.5 billion in 2019. Shetty’s financial services firm Finablr, an LSE-listed enterprise that owns the remittance firm UAE Exchange, has discovered that $100 million worth of cheques were issued from the company without the board’s knowledge. Top executives at both firms have either resigned or been sacked. LSE has suspended trading in the stock of both the companies. NMC Health has been placed in administration. Shetty himself stepped down as director and joint non-executive chairman of NMC Health in February and is now facing criminal charges in Abu Dhabi allegedly for fraud and forgery.