Business Development: A Case Study on B.R. Shetty's Financial Scandal

This report provides a comprehensive analysis of Bavaguthu Raghuram Shetty's business empire, detailing his establishment of various successful brands like NMC Healthcare and UAE Exchange. It explores the reasons behind his downfall, including the Muddy Waters report exposing fraud at NMC Health Plc, leading to significant exposure for UAE and GCC banks. The report examines the actions taken by banks, the potential strategies Shetty could have employed to mitigate the crisis, and the lessons learned from this case. It highlights the impact of the scandal on the financial system and emphasizes the importance of ethical business practices to avoid reputational damage and financial ruin. The report references various sources to support its findings, including news articles and financial publications, providing a detailed overview of the events and their consequences.

Surname 1
Institution
Student
Course
Date

Surname 2
Table of Contents
Introduction to Shetty......................................................................................................................3
Brands owned by Shetty..................................................................................................................3
What went wrong with Shetty?........................................................................................................4
Exposure of UAE and GCC banks..................................................................................................4
How Shetty could beat the financial system....................................................................................5
Actions from the side of the banks in UAE and other countries.....................................................5
Conclusion and lesson learned.........................................................................................................6
Works Cited.....................................................................................................................................7
Appendices......................................................................................................................................8

Surname 3
Bavaguthu Raghuram Shetty
Introduction to Shetty
Bavaguthu Raghuram Shetty was born on 1st August 1942 in Kaup, Udupi district, Karnataka.
Shetty wound up with his pharmaceutical degree in India where he also worked as an assistant
chairman of Udupi Municipal Council (Shetty par. 1). In 1973, he shifted to United Arab
Emirates where he worked as a medical representative. In 1975, Shetty established New Medical
Centre Health (NMC) that offered affordable healthcare for the locals. NMC became one of the
most successful healthcare centers in the UAE serving above four million patients per year (par.
3). In 1980, Shetty established the UAE Exchange purposely to help expatriates send money to
their families regardless of the geographical location. Apart from investments, he undertook
other activities that earned him a lot of awards and recognition. For example, in 2005, he was
awarded the Abu Dhabi Award - the most premier noncombatant distinction in the Emirate.
Also, in 2008, Ernst & Young Middle East recognized him as the Entrepreneur of the year
(Samoglou par. 4).
Brands owned by Shetty
Shetty is a renowned investor who owns several brands. After arriving in UAE in 1973, Shetty
founded the BRS Ventures, one of the premium business houses in United Arab Emirates with a
significant global footprint and several fruitful acquisitions (Forbes Media LLC par. 1). In 1974,
Shetty commenced his innings and established the first private healthcare center in the UAE, the
NMC Healthcare. Due to his obligation to offer ultramodern amenities, NMC health facility
became the first healthcare corporation from the Gulf Cooperation Council to be included in the
London Stock Exchange and enlisted as a part of the FTSE 100 index (Reuters par. 6).

Surname 4
Considering the increasing number of expats in the UAE, Shetty founded UAE Exchange and
acquired Travelex to enable the expats transact with their families in remote areas. UAE
Exchange became one of the UAE’s most successful brands and a holding company registered
on the London Stock Exchange (Boland par. 1). In collaboration with several multinationals like
Hetero Pharmaceuticals, Abbot Laboratories, and Merck, in 2003, Shetty established Neopharma
pharmaceutical manufacturing facility (John par. 2). Shetty had diversified business interests,
and as a result, he ventured in environmental, hospitality, and educational sectors. For instance,
he acquired an Indian-based company, the Assam Tea Corporation, and founded BR Life, a
prominent healthcare brand headquartered in Bengaluru (Abu Dhabi par. 1).
What went wrong with Shetty?
Muddy Waters, due diligence based investment firm, gave out a report disclosing fraud at NMC
Health Plc. Since the issuance of that report, Muddy Waters investigations have intensified into a
disturbing scenario for Shetty as they are casting doubts concerning his net worth (Thomas par.
2). Records are showing that Shetty pledged 25% of his NMC share against credits with Falcon
Private Bank and First Abu Dhabi Bank. Two more stakeholders might be owning 50% of
Shetty’s reported shareholding. Al Salam Bank Bahrain, another creditor, has vended some of
the shares to enact collateral security over Shetty’s loan (Godinho par. 2). Abu Dhabi Bank is
also reported to have vended another share before Al Salam Bank. What is more, Herbert Smith
Freehills, a law firm has also initiated a scrutiny of Shetty’s holdings at his appeal. On 17th
December 2019, Muddy Waters report suggested a possibility of overpaid assets, understated
debts, and inflated cash balances on NMC (Godinho par. 8). As a result, the shares of this
company have plunged over 67%, and it is now at a threat of hostile takeover. BRS Ventures, on
the other hand, does not provide consolidated financial statements to prevent a comprehensive

Surname 5
assessment of Shetty’s net worth. His other assets include a pharmaceutical business Neopharma,
a waste-management firm, and a catering company which four months ago was in the
preliminary phases of preparing for an initial public offering. (Stupples par. 7)
Exposure of UAE and GCC banks
The fraud scandal revolving around NMC Health Plc broadened, with GCC and UAE banks
revealing over $2 billion exposure and one amongst the premier creditors requesting for the
fraught hospital operator to be put under supervision. In Dubai Islamic Bank PJSC, for example,
disclosed that it has more than $541 million of exposure to NMC Health Plc, which threatens to
erase about 50% of its yearly profitability (Bloomberg par. 2). Besides, Abu Dhabi Islamic Bank
PJSC revealed that it had lent the leading private healthcare provider an amount totaling to
$291.4 million. Abu Dhabi Commercial Bank PJSC also requested a law court to put NMC into
supervision. The security loss from the collapse of NMC Health Plc and its subsidiaries is
broadening, bringing in the UAE’s topmost lenders, healthcare system, and central bank. The
upshot emanates as financial institutions struggle to minimize the effect of diminishing oil prices
and the worldwide coronavirus epidemic. Apart from local banks, international banks such as
Standard Chartered Plc, JPMorgan Chase & Co., and HSBC Holdings Plc have huge unsettled
loans to NMC (Bloomberg par. 5).
How Shetty could beat the financial system
Shetty can easily beat the financial system and get his enterprises back to normal. The first thing
he can do is to assess the risk areas and address them before the investigation intensifies. There is
a possibility that there other issues surrounding NMC and it is prudent to address those ones and

Surname 6
deal with the ones already in the public domain. Assessing risk areas can involve reviewing
activities that can be termed as fraudulent such as billing, interactions with financial institutions,
contracts and subcontracts with other business entities. Taking such a step can allow Shetty to
curb more duplicitous cases from emerging and give himself ample time to address the existing
ones. In addition, the investor can seek help from relevant individuals and organizations that can
help him handle the cases facing his investments. Professionals like lawyers who can negotiate
on behalf of NMC and help the company win against the financial system. Besides, Shetty can
get help from other organizations which had previously been in similar situations. Such firms can
provide him with practical measures that he can use to beat the financial system. As the cases
proceed, Shetty should strengthen compliance in all his companies to assure investigators and
investors that his companies are in a good shape. An effective compliance plan can show
investigators and stakeholders that despite the ongoing cases, Shetty treats compliance and ethics
seriously and has taken logical measures to prevent further scandals.
Actions from the side of the banks in UAE and other countries
Muddy Waters scrutiny that has displayed Shetty in a bad picture has prompted banks to take
reasonable legal actions against his companies. Some of the creditors are requesting for him to
be put into administration until they recover their funds. Abu Dhabi Islamic Bank PJS for
instance closed by the maximum and allowed to lend NMC $291.4 million. After learning about
the company’s fraud cases, the bank requested a court to place the company into administration
(Bloomberg par. 6). This month, Abu Dhabi Commercial Bank applied to the United Kingdom’s
Supreme Court for administrators to assume full regulation and supervision of NMC (Kerr,
Daniel and Robert Smith par. 1). In addition to the local banks, global creditors like JPMorgan
Chase & Co. and HSBC Holdings Plc have also lost their monies in NMC and they are in

Surname 7
discussions to form a committee to discourse on ways to recover their funds. The broadening
sham issue has as well put a limelight on the nation’s central bank, which in March this year took
the intermittent step of taking control over United Arab Exchange that is connected to NMC
through its originator Shetty and cross-ownership. In addition to monitoring the corporation’s
money transactions and payment operations in the Gulf state, it as well oversees the country’s
commercial moneylenders. This month, UAE supplanted the chief of central bank with a former
head of its main creditor to take the leadership. Abdel Hamid Saeed, who was earlier at the helm
of First Abu Dhabi Bank PJSC, succeeded Mubarak Al Mansoori, who had worked as the central
governor for six years (Bloomberg par. 7).
Conclusion and lesson learned
From what happened, we can learn that fraud is a severe menace that can destroy not only an
individual but also a company’s reputation. Shetty took so many years to build his brand but
destroyed it by engaging in underhand deals that led to his devastating fallout. It is prudent to
avoid any sham or dubious actions that can put our brands into scrutiny since when they are
uncovered; we completely lose our hard-earned identity and even our affluence.

Surname 8
Works Cited
Abu Dhabi. "LISTED ON FTSE 100 INDEX." 2020. thebusinessyear. 2020 April 2020
<https://www.thebusinessyear.com/abu-dhabi-2020/br-shetty-founder-chairman-brs-
ventures/vip-interview>.
Bloomberg. "NMC crisis widens as UAE banks reveal $2bn-plus exposure." 6 April 2020.
Arabian Business industries. 20 April 2020 <https://www.arabianbusiness.com/banking-
finance/444432-nmc-crisis-widens-as-uae-banks-reveal-2bn-plus-exposure>.
Boland, Hannah. "Travelex-owner Finablr considers $200m London float." 9 April 2019. Th e
Telegraph . 20 April 2020 <https://www.telegraph.co.uk/technology/2019/04/09/travelex-
owner-finablr-weighs-london-float-amid-rising-investor/>.
Forbes Media LLC. "#42 B.R. Shetty." 10 October 2019. Forbes. 20 April 2020
<https://www.forbes.com/profile/br-shetty/#4e171df86cc7>.
Godinho, Varun. "UAE’s First Abu Dhabi Bank sells 2.5 million shares held by NMC’s BR
Shetty." 8 March 2020. GULF BUSINESS. 20 April 2020
<https://gulfbusiness.com/uaes-first-abu-dhabi-bank-sells-2-5-million-shares-held-nmc-
founder-br-shetty/>.
John, Issac. "Neopharma, Merck Serono in deal for local production." 3 December 2012. Khaleej
Times. 20 April 2020 <https://www.khaleejtimes.com/business/local/emirates-nbd-q1-
profits-fall-24--on-coronavirus-impairment-surge>.
Kerr, Simeon, Thomas Daniel and Robert Smith . "NMC creditor applies to UK court to bring in
administrators." 4 April 2020. FINANCIAL TIMES . 20 April 2020
<https://www.ft.com/content/03f19938-ea0e-496d-8668-1c4dd80a73c0>.

Surname 9
Reuters. "Timeline: NMC Health's expansion and ailments." 17 February 2020. REUTERS. 20
April 2020 <https://www.reuters.com/article/us-nmc-health-offer-timeline/timeline-nmc-
healths-expansion-and-ailments-idUSKBN20B0S0>.
Samoglou, Emmanuel. "Abu Dhabi Awards: B R Shetty." 23 may 2015. The National. 20 April
2020 <https://www.thenational.ae/uae/abu-dhabi-awards-b-r-shetty-1.119120>.
Shetty, Bavaguthu Raghuram. "Journey." 2018. Dr. B R Shetty. 20 April 2020
<https://www.brshetty.com/journey-br-shetty.html>.
Stupples, Ben. "How BR Shetty went from billionaire to bust." 20 February 2020. livemint. 20
April 2020 <https://www.livemint.com/companies/people/how-br-shetty-went-from-
billionaire-to-bust-11582136713887.html>.
Thomas, Daniel. "NMC Health finds evidence of suspected fraud in its finances." 12 March
2020. FINANCIAL TIMES. 20 April 2020 <https://www.ft.com/content/940e5902-6443-
11ea-a6cd-df28cc3c6a68>.

Surname 10
Appendices
Appendix 1
Further reading:
 https://gulfnews.com/business/banking/adcb-applies-to-uk--high-court-for-appointment-
of-joint-administrators-for-nmc-health-1.70807912
 https://www.adcb.com/about/news/2020/april/nmc-news.aspx
 http://www.drbrcrshettyfoundation.org/bavaguthu-raghuram-shetty-bangalore-udupi-
mangalore-karnataka.html
Appendix 2

Surname 11
Emirates NBD exposure includes Emirates Islamic Bank; DIB's exposure includes Noor Bank;
ADIB has additional $31 million sukuk exposure to NMC Health
Source: Bloomberg. "NMC crisis widens as UAE banks reveal $2bn-plus exposure." 6 April
2020. Arabian Business industries. 20 April 2020
<https://www.arabianbusiness.com/banking-finance/444432-nmc-crisis-widens-as-uae-
banks-reveal-2bn-plus-exposure>.