By Ari Altstedter | BLOOMBERG

Along the river Beas in North India sits a sprawling spiritual commune that’s somewhere between a traditional ashram and a Florida gated community. There’s a grand meeting hall with tiered spires and pearl domes, but also tract housing and an American-style supermarket. It’s home to 8,000 devotees of the Master: Gurinder Singh Dhillon.

His group, the Radha Soami Satsang Beas, says it has more than 4 million followers worldwide. Many call him a God in human form. But in the secular world of money, Dhillon, 64, is a key character in one of the most dramatic collapses in the annals of Indian business: The unraveling of the financial and health-care empire owned by the Singh brothers, Malvinder and Shivinder.

Over the years, the brothers’ main holding company loaned about 25 billion rupees ($360 million) to the Dhillon family and property businesses largely controlled by them, according to documents and people familiar with the matter. Some of those outlays were financed with money borrowed from the Singhs’ listed companies, and when combined with other Singh investments gone bad threw their empire into a debt spiral, a Bloomberg News analysis of public records and interviews with 10 people familiar with the finances of both camps showed.

Heirs to a generations-old business house once worth billions, the brothers have in the last six months seen a dramatic fall in their fortunes. They’ve had their public shareholdings seized by lenders. They’re under a criminal probe by financial authorities over 23 billion rupees missing from their listed companies. They owe $500 million over fraud allegations related to the 2008 sale of drugmaker Ranbaxy Laboratories. They’ve also lost the family mansion. Both deny any wrongdoing.

Dhillon is a cousin of the Singhs’ mother, and he became a surrogate father to them after the death of their own in the late 1990s. Since then, the finances of the spiritual leader and the brothers have grown intertwined, with money flowing from the Singhs to the Dhillon family via loans through shell companies and an array of arcane financial instruments, according to the documents and people familiar with the matter, who asked not to be named because of the ongoing legal probes. Dhillon hasn’t been accused of any wrongdoing.

All members of the spiritual commune, including the guru, are expected to support themselves financially, and the sect’s representatives said the Master’s business dealings are a personal matter separate from his role at the spiritual group.

The Singhs’ downfall comes as Prime Minister Narendra Modi pushes to increase transparency and attract more foreign investment to the world’s fastest growing major economy. But the brothers’ story is a cautionary tale to anyone doing business in India, offering a window into the opaque corporate structures common in the family dynasties that dominate Indian commerce.

“This opacity makes for risk,” said Arun Kumar, an economist with the New Delhi-based Institute of Social Sciences. “Legitimate business people may not want to come to India.”

The Singhs are famous for expanding their two public firms – hospital operator Fortis Healthcare Ltd. and financial firm Religare Enterprises Ltd.—at breakneck speed after reaping $2 billion from the Ranbaxy sale. Less known is the massive debt they took on to do so, all while they were financing a real-estate portfolio largely owned by their guru’s family.

Malvinder, 45, and Shivinder, 43, haven’t been charged with any crimes. The brothers acknowledge having financial ties to Dhillon, and in written comments said they are in dialogue with the Dhillon family and its companies to address the money owed to them.

But they also said it would be “untrue” to suggest that the guru was a cause of their group’s financial troubles. “Malvinder and Shivinder are unequivocal about this: Mr. Dhillon is their spiritual Master,” the brothers wrote. “He has only ever acted out of love and has only ever had their best interests at heart.”

They’re less generous to another follower of the spiritual group, Sunil Godhwani, whom they say was appointed to lead Religare at Dhillon’s recommendation. They say Godhwani was also in charge of their holding company, RHC Holding Pvt., and often took decisions without informing them. They say he was the architect of the financial structures, including the loans to the Dhillon family and companies, that led to their financial troubles.

Bloomberg News has been unable to independently verify the Singhs’ claims that Godhwani ran their holding company in the period between 2010 and 2016, when most of the major borrowing, loans, investments and routing of funds occurred. RHC says he was president there between 2016 and 2017. Godhwani declined to comment, and he left his role as chairman of Religare in 2016.

The Singhs’ rise as businessmen in their own right began in 2008, when they sold Ranbaxy, then India’s largest drugmaker, to Japanese pharmaceutical company Daiichi Sankyo Co. The sale occurred just as the U.S. Food and Drug Administration started raising questions about the Indian firm’s manufacturing practices and the safety of its drugs, although Ranbaxy denied the allegations at the time.

The brothers went on to use their cash reserves aggressively to build up Fortis and Religare—which would each top $1 billion in market value as India’s demand for health and financial services surged. They took their father’s place in Delhi high society among other old business families, becoming patrons of Indian artists and socializing at exclusive clubs.

THE STORY WAS FIRST PUBLISHED AT BLOOMBERG, 16 AUG 2018. TO READ FULL STORY, GO HERE

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