DEVELOPMENT

• IHH Healthcare (IHH) is seeking about INR109.3b (approximately RM5.7b), with INR4.2b (RM200m) at its lowest, in compensation from Japan's Daiichi Sankyo (DSCL) for its stake buy in India's Fortis Healthcare (Fortis).
• A report was submitted by IHH's unit, Northern TK Venture (NTK) which includes an analysis and quantification of the damages NTK suffered, based on three counterfactual scenarios.
• The upper bound of the damages is an increase from the initial figure of JPY20b set out in CY23.

OUR VIEW

• Legal outcome unpredictable. The outcome of this case is still ladened with uncertainty, as the outcome heavily depends on the evidence, argument and discretion. However, in consideration that NTK raised its damage claims may indicate that a strong belief in the validity of the case. With NTK submitting expert reports quantifying the damages, the case could lead into IHH and NTK's favour. However, the complexity of the case relating to the stalled open offer for Fortis since CY18 might also influence the judicial decisions on whether the compensation estimated on losses suffered by NTK is agreeable.
• Possible scenarios. We identified several scenarios that could play out in this case.
• If IHH wins the case, the group could receive the compensation, effectively and positively impact its future financial performance with a one-off, further boosting investor confidence.
• Conversely, if the case does not go in IHH's favour, the additional legal cost could lead to a momentary financial strain and negative marker perception.
• The involved parties could reach a settlement before the court delivers a verdict, which would involve additional negotiations, and a new compensation amount lesser than the one proposed in place with a shorter litigation.
• A partial victory is also possible, wherein the court favours IHH but awards a lower compensation amount than claimed, which gives the required financial relief but without covering the full damage claims. Either way, we believe the overall situation we believe will not affect IHH's other operations in the long run.
• Considering that the case is still ongoing, and prior to IHH's upcoming results, we make no changes to our earnings forecast at this juncture. Hence, we maintain our NEUTRAL call for IHH, with an unchanged target price of RM7.56.

Source: MIDF Research - 7 Feb 2025