Mumbai Padmaja Reddy, former managing director and founder of Spandana Sporti Financial Ltd, has accused private equity firm Kedara Capital of violating the Articles of Association (AOA) of the company and diluting the rights of minority shareholders through preferential allotment with warrant Is.
Reddy has instead sought a rights issue that would allow her and her husband to participate in the planned capital infusion to maintain a 16.79% stake in the microfinance lender.
The Kedara-controlled board had earlier this month approved the setting up of 300 crore capital from Kedara and Valeant Capital Partners 458.78 per share.
“The AOA mentions only about the rights issue… that all investors should be given equal rights. There is no mention about preferential allotment,” she said.
“Also getting Kedara and Valeant to invest in 430 per share, below its book value. What happens to other investors, including retail investors, who have invested here? 860 per share three years ago? Kedara had invested 237 per share. Don’t these investors need the opportunity? They want to take over the company at the cost of other investors.”
“I plan to write to the Securities and Exchange Board of India (SEBI) against it,” she said.
In 2019, the Hyderabad-based microfinance company placed its initial public offering (IPO) at the price of 856 per share and raised 1,200 crores. Contains 400 crore fresh issue and 800 crore offer for sale by promoters and other investors.
Kedara Capital led two years before IPO 854 crore investment through its special purpose vehicles Kangchenjunga and Kedara AIF I 237 per share. The investment was made following Spandana’s exit from corporate debt restructuring after Andhra Pradesh was hit by the microfinance crisis.
Reddy also questioned the need to raise 300 crore capital when the company had surplus liquidity 1,500 crore and capital adequacy of 46.71% as on 31st December 2021. “The company has 2700 crore capital. It has outstanding assets under management/portfolio 4,400 crores. The Reserve Bank of India allows a non-banking financial company to have six times the leverage. The leverage here is 1.5x. Does the company need to raise capital?” Reddy asked in a recent LinkedIn post.
In a December report, India Ratings had placed Spandana’s debt instruments on negative clock following Reddy’s fallout with the board. The rating agency confirmed that the currency rating of IND A reflects Pulsat’s adequate capital buffer, low leverage and adequate liquidity.
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