Promoter-investor tussle hits Spandana Sphoorty MFI

Promoter-investor tussle hits Spandana Sphoorty MFI

Spandana Sphoorty Financial managing director Padmaja G Reddy resigned from the microfinance lender following disagreement with private equity investor Kedaara Capital, in yet another high profile exit in the microfinance sector as a result of promoter-investor tussle. The founder managing director is said to have objected to Kedaara’s bid to sell the country’s second largest NBFC-MFI to Axis Bank at “a throw away price”.

The board of Spandana has accepted her resignation with immediate effect. It will be hiring an eminent industry veteran as its new MD & CEO, and construct a new management committee, it announced in a stock exchange filing late evening Tuesday.

This revives poignant memories of SKS Microfinance founder Vikram Akula who also exited following issues with investors more than a decade ago. SKS, now known as Bharat Financial Services, has been taken over by IndusInd Bank in July 2019.

Reddy confirmed the matter speaking to ET. Kedaara Capital did not immediately respond to ET’s query.

“The board led by investor ‘Kedaara’ decided not to extend my employment contract beyond my current term as managing director,” Reddy wrote in a departing email, addressed to Spandana employees.

“I opposed underselling of Company to Axis Bank at a throw away price,” she said.

ET viewed a copy of the email.

“While other MFIs were acquired at 4.75x & 3.5x book value multiples in the past few months, Kedaara wanted to sell Spandana at 1.6x, which is one third of other companies’ valuation.”

Spandana has an estimated Rs 8,000 crore loan portfolio.

The merger between Spandana and Axis Bank was proposed at a valuation of Rs 700 crore, she said. This, according to her, was significantly “undervalued”.

With Reddy going out, the process of merger with Axis Bank may get smoother as Kedaara is likely to mobilise the required three-fourth shareholder majority for the merger approval.

A few months ago, Shalabh Saxena of Bharat Financial was projected as the future CEO of Spandana in the offer to sale document submitted to Axis Bank, people familiar with the matter said. He is currently MD & CEO of Bharat Financial Inclusion, a wholly-owned subsidiary of IndusInd Bank. Saxena could not be contacted immediately for comments.

Reddy has 17 percent stake in the company. Kedaara holds 45 percent. Her term was supposed to expire on April, 2022.

About four and half years ago, Spandana Sphoorty Financial, a Hyderabad-based microfinance institution had Rs 650 crore in equity capital from a Kedaara Capital-led consortium and Rs 1,100 crores of debt capital from IndusInd Bank, Yes Bank and ICICI Bank.

Spandana was one of the MFIs that had faced the brunt of Andhra Pradesh MFI crisis over a decade ago.

It went through a loan recast programme, which helped the company regain financial health from 2017 onwards. The company had a portfolio of Rs 1,100 crore immediately after exiting debt restructuring.

“We grew the book by almost eight times in four years, which is a history,” said Reddy, who had founded Spandana in 1998.

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