Assets Under Management AUM

Kedaara Capital Chose Axis Bank Offer Over Federal Bank Offer, Says Spandana Founder

The Kerala-based federal bank was a potential contender for Spandana Spoorthy, but was not considered by Kedaara Capital, said the founder and former managing director of microfinance lender Padmaja Reddy. CNBC-TV18.

Reddy’s exit from Spandana Spoorthy earlier this month came amid disputes with the lender’s largest shareholder investor, Kedaara Capital, over a proposed deal with Axis Bank, which the founder viewed as “under- evaluated “the company.

When asked if Axis Bank was Spandana Spoorthy’s sole suitor, Padmaja Reddy said, “These guys from Kedaara only told me that they were contacted by the Federal Bank as well. But again, they felt that Axis Bank, the share has higher liquidity. “

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However, Reddy said Kedaara Capital had not explored any deal with Federal Bank because the other suitor, Axis Bank, wanted an exclusivity deal to negotiate the deal.

“They were more optimistic about Axis Bank, but again, as a listed company, you really have to explore all the opportunities in the market, because we have to be fair with the public market investors, we have to be fair with retail investors, and the process has to be done. But unfortunately the process was not followed. A banker was appointed. It seems that is what they told me, they told me that ‘Axis Bank said the company has to sign the exclusivity. We can’t run the process. We can’t really talk or dialogue with other suitors… They said they weren’t in discussion with the Federal Bank, because the action of the Federal Bank does not have as much liquidity as the action of the Axis Bank. And they wanted to obtain immediate liquidity for the business, ”she explained when asked. asked why the offer was not considered.

Padmaja Reddy’s differences with Kedaara Capital stem from what it claims to be Spandana’s “sub-sale” to Axis. “There was no other difference between me and Kedaara. It was just that they wanted to sell the business. I resisted,” she said.

“Kedaara came to see me one day to tell me that Axis Bank was interested in buying Spandana, they explained to me that they had no choice but to sell Spandana because they own 45% of the company capital and the block deals will be very, very difficult and they have to come out. I said okay let’s go. Then after a few days they came back and they said they had gotten the When I asked what the valuation was – they said it was 1.6 times the multiple book value. To my surprise, I was wondering why 1.6 times the multiple, because I was recalled at what valuation the acquisition of SKS-IndusInd Bank occurred. I still remember that it was acquired 4.75 times for multiple book value and again. During the same time there was another acquisition which occurred where Fullerton was acquired by Sumitomo Bank. Again, it was acquired at 4.75 times multiple book value. Another small MFI Midland Microfinance in which ICICI Bank took a 10 percent stake – this also happened at 3.5 times multiple. I was shocked and surprised because Spandana is the number one microfinance organization in terms of profitability, efficiency and everything. Why are these guys selling for lower prices? ”She asked.

“I said, I won’t let this deal happen. I’m not selling my stake. They were very, very upset,” Reddy added.

She alleged that once she clearly expressed her opinion on the Axis Bank deal, Kedaara Capital kicked her out of the company she founded in 1998.

“They (Kedaara) started making their plans to make sure that I would be leaving the business so that they could complete the Axis Bank transaction in a month or two because I knew they had absolutely no plans to. running the business. staff that in a month or two the name of Spandana will change, it will be Axis Bank, you will all be employees of Axis Bank, “said Reddy CNBC-TV18.

The company recently made the news about its dispute with Indusind Bank after trying to appoint a new CEO and CFO of the bank’s subsidiary, Bharat Financial. Spandana Sphoorty announced that Shalabh Saxena, currently Managing Director and CEO of Bharat Financial Inclusion, has accepted the role of Managing Director and CEO, and Ashish Damani, CFO of Bharat Financial, has agreed to become President and CFO of Spandana. But a day later, IndusInd responded to the news of the appointments, specifying that neither executive had resigned and that they would only be relieved after an ongoing audit of more than 84,000 loans sanctioned without consent. of BFIL customers due to a technical problem has been terminated.

Spandana Spoorthy was among many microfinance lenders who were hit hard by an industry-wide crisis in Andhra Pradesh in 2010. The NBFC-MFI was subsequently admitted to the debt restructuring cell of companies (CDR).

He came out of a debt restructuring in 2017, raising $ 270 million in funding. Of this amount, approximately $ 100 million came from equity capital of a consortium led by Kedaara Capital. Currently, Kangchenjunga Ltd, a special purpose vehicle through which Kedaara has invested in the company, owns 45.5%, and promoters Padmaja Reddy and her husband own 16.79% in Spandana Sphoorty.

Spandana Sphoorty saw a massive drop in its total assets under management (AUM) at the end of the June quarter. Its assets under management stood at around Rs 7,390 crore at the end of June, compared to Rs 8,157 crore in the previous quarter. Its gross non-performing assets rose more than 34% in the quarter to 339.94 crore rupees, with a gross NPA ratio of 4.6% in the June quarter from 3.1% in the previous quarter. The lender has yet to release its second quarter figures.

CNBC-TV18 contacted the Federal Bank for comment on the story. Their response is awaited.

(Edited by : Jomy Jos Pullokaran)

First publication: STI