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What led to the downfall of UAE’s biggest healthcare firm?


Before December 2019, New Medical Care Health (NMC) was regarded as one of the biggest healthcare firms in the United Arab Emirates (UAE). In April 2020, NMC Health filed for insolvency. Here’s what happened.


Kuvam Uppal

MBA Student, IMT Ghaziabad

Before December 2019, New Medical Care Health (NMC) was regarded as one of the biggest healthcare firms in the United Arab Emirates (UAE). NMC was founded by B.R. Shetty (born in India) in 1975, who was also the country’s first healthcare representative. NMC over the next 46 years emerged as the largest private healthcare provider in the UAE treating over four million patients annually across 45 facilities spread over 8 countries.

As founder of NMC, Shetty built relationships with the UAE’s all-powerful sheikhs who appeared to open all doors. It became the first company from Abu Dhabi to be listed on the London Stock Exchange(LSE). Business was booming, the Initial Public Offering (IPO) raised $186m and raised NMC’s market value to more than $8bn.

But all that glitters, is not gold. NMC was rocked when US short-selling hedge fund Muddy Waters questioned its finances. The Muddy Waters report raised concerns that the Middle East’s largest hospital operator had overpaid for assets, inflated cash balances and understated debt. NMC shares plunged, falling by more than 60% which led to its delisting from LSE.

In March 2020 the company reported that it has identified over $2.7 billion debt that had previously not been disclosed to the Board. This meant that the actual indebtedness was $5 billion as of 30 June 2019. On 24 March 2020 the total debt was estimated at $6.6 billion. In April 2020, NMC Health filed for insolvency. With coronavirus raging throughout the country, the timing of this fraud could not have been worse. Scores of patients went unattended while BR Shetty fled the country.

The question to ask now is how did the auditors miss such a large amount of debt? 

NMC’s auditor Ernst & Young LLP never publicly raised concerns over NMC’s statements. But there was possibly, a conflict of interest. Muddy Waters also highlighted the relationship between NMC and EY, pointing out that their board included 2 former EY partners. Now, the U.K. accounting regulator Financial Reporting Council (FRC), has opened a probe into Ernst & Young’s audit of NMC’s 2018 financial statements.

A fraud of this magnitude went right under the noses of EY. This raises serious concerns about its credibility. The loss to investors and the stock owners in London Stock Exchange is huge with NMC going bankrupt. Moreover, this financial scam has hit investor sentiment badly. 

B.R. Shetty claims he is a victim of fraud where his signatures were forged on contracts. Probably the biggest financial scam of 2020, this event went largely unreported by the global media. 

What is UAE trying to hide ? Where did this money go? Only time will tell.

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