The Rise And Fall Of Billionaire B.R. Shetty

By on February 27, 2020 in ArticlesBillionaire News

Bavaguthu Raghuram "B.R." Shetty was once a billionaire with a taste for the finer things in life. He had a private jet, flashy cars, and two entire floors at the Burj Khalifa, the world's tallest skyscraper. He hobnobbed with politicians, Bollywood celebrities, and Bill Gates. In short, he very much enjoyed the life his wealth gave him access to. And he had more than enough money to afford his lifestyle – at least on paper. Shetty is the founder of a number of companies, including hospital operator NMC Health and financial services firm Finablr. In early December, his stakes in his public companies were valued at $2.4 billion. The thing is, Shetty had been borrowing against his shares in his companies for quite a long time and someone figured it out and blew the whistle. Now, his stake is worth $885 million, but Shetty's fortune may now be just a fraction of that, depending on the size of his debt.

Burj Khalifa (Photo by Tom Dulat/Getty Images)

It seems that Shetty did not learn an important lesson from his past. In the early 1970s, a young, debt-laden, unemployed Shetty moved to the United Arab Emirates with nothing but a dream, his college degree, and a few dollars in his pocket. Shetty moved to Dubai as a last resort, after losing everything when he defaulted on a large personal loan from an Indian bank. Shetty saw the UAE of the early 1970s as the land of opportunity so he put on the one shirt he owned, grabbed his wallet with $8 in it and set off for Abu Dhabi. He was a trained pharmacist back in India and as such, he quickly saw an opportunity in the UAE's healthcare sector. In the 1970s, the healthcare facilities in Dubai were rudimentary at best. Shetty founded the New Medical Center (NMC) in 1975. He expanded NMC into a full-fledged hospital in 1981, taking advantage of the UAE's oil boom. Today, NMC is the UAE's largest private healthcare provider. He is largely credited with modernizing health care in the UAE.

Now, it has been revealed that Shetty pledged a quarter of his stake in NMC against loans with First Abu Dhabi Bank and Falcon Private Bank in Zurich. Two other NMC shareholders may own half of his stake. Yet another lender, Al Salam Bank Bahrain, has already sold some of the shares he pledged to that bank to cover payments on one of Shetty's loans. First Abu Dhabi Bank also sold a chunk of shares to cover payments for Shetty's loans.

In mid-December, an investment firm issued a report on NMC which hinted at inflated cash balances and understated debt. Shares of NMC have plunged more than 67% since then and the company is in danger of takeover.

Shetty isn't the only billionaire to leverage his assets. Elon Musk has used shares in Tesla to guarantee his personal loans. Larry Ellison has used millions of shares in Oracle as collateral for funds that make his lavish lifestyle –including an America's Cup team and a tennis facility in Indian Wells – possible. It is a risk to do this, as is evidenced by Shetty's lenders selling shares he offered as collateral.

Making this matter even more complicated is the fact that Shetty pledged another block of NMC shares in 2018 in an arrangement with Goldman Sachs. In January 2020, he pledged most of his stake in Finablr to refinance a loan from the company's takeover of foreign-exchange firm Travelex for $1.2 billion.

Shetty's other assets include a catering company, a waste-management firm, and pharmaceutical business Neopharma, which recently began the process of planning for an initial public offering.

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