* Fortis chooses 18 bln rupees investment from Hero-Burman
* Amount less than half that offered by Malaysia's IHH
* Shares fall as much as 4.9 pct; close down 3 pct
* Hero-Burman waive due diligence, quickening fund access (Adds comments from Fortis, Hero-Burman, shareholder, bidders)
By Sudarshan Varadhan and Alasdair Pal
NEW DELHI/LONDON, May 11 (Reuters) - India's Fortis Healthcare Ltd aims to accept an offer of investment from the underdog of a five-way bidding war, in a decision that drew investor ire and sent shares in the cash-strapped hospital operator down almost 5 percent.
Hero Enterprise Investment Office and Burman Family Office will together invest 18 billion rupees ($267 million), valuing Fortis at 90 billion rupees, subject to shareholder approval.
"We are sure that the shareholders will see the intrinsic value in our proposal," Hero-Burman said in a statement.
A major Fortis shareholder, however, which favoured an offer over twice the size from Malaysia's IHH Healthcare Bhd , told Reuters it was unhappy with the decision and planned to vote against it at a meeting expected within a month.
The shareholder, who did not want its voting intentions publicly known and so declined to be identified, said the "ridiculous" offer was the worst received, and that other shareholders were likely to vote against it.
Reflecting the sentiment, Fortis shares fell as much as 4.9 percent on Friday before closing down 3 percent.
"We looked at all the different binding bids from the point of view of certainty versus risk. We looked at all of them from the point of view also of liquidity for the company," Fortis director Brian Tempest said at a news conference on Friday.
He said five of the board's eight directors voted to recommend Hero-Burman.
The decision is aimed at ending a bidding war to buy part or all of Fortis, which operates about 30 private hospitals in India and is in need of cash after an aggressive period of expansion.
The contest attracted international suitors seeking to capitalise on a lucrative private healthcare market that is expected to get a boost from a government plan to expand an insurance programme to half of India's 1.3 billion people.
If approved, Hero-Burman will be Fortis' largest shareholder with just under a fifth of the company, having made the only offer that excluded due diligence as a precondition for investment, giving Fortis quick access to the funds.
With IHH's offer, the majority of funds would be accessible only after conducting due diligence.
Fortis initially agreed to be bought by domestic peer Manipal Hospitals with global buyout firm TPG Capital Management LP, but shareholder objections and competing offers scuttled the deal.
Manipal and IHH on Friday said they were disappointed with the outcome, with IHH saying it was open to further discussion.
Fortis also received an offer of investment from peer Radiant Life Care Pvt Ltd with global private equity firm by KKR & Co LP, and a non-binding offer of investment from China's Fosun International Ltd.
Radiant and Fosun were not immediately available for comment.
Hero Enterprise Investment Office is an investment unit of Sunil Munjal, whose family runs India's largest motorcycle maker, Hero MotoCorp Ltd. The Burman Family Office is the private investment arm of the family that controls consumer goods company Dabur India Ltd. ($1 = 67.3250 Indian rupees)
(Reporting by Sudarshan Varadhan in NEW DELHI and Alasdair Pal in LONDON; Additional reporting by Devidutta Tripathy, Tanvi Mehta and Rama Venkat Raman; Writing by Sayantani Ghosh; Editing by Sai Sachin Ravikumar and Christopher Cushing)