‘My Opposition To Axis Bank Deal Reason For Ouster From Spandana,’ Says Padmaja Reddy

Till Axis Bank came into the picture, I had made it clear that I am not going to sell my stake, I am not going to sell my company at low valuations. This is not the right time. But whatever has happened it is because I said no to the Axis Bank transaction.

They also understand that the valuation is very low. But, remember that when Kedaara invested, we were just exiting from CDR (corporate debt restructuring). They invested at Rs 400 crore pre-money . Even at 1.6 times book , the company was d at Rs 4,060 crore. They were making huge return on their investment (in the Axis Bank deal). You know how private equity operates. There were two or three people who would have had 20% carry on the returns, which is around Rs 200 crore had the Axis Bank transaction happened. They were unhappy about it. They expected 'yes boss' kind of nature from me. I said this is not correct. I said look at the public market investors. They invested at Rs 860 stock price and if after two years they sell at Rs 700, they will have very bad memory of the company. They were tracking that my contract was coming up for renewal. So at the backend they decided that they will not renew my contract, I will leave the company and since the due diligence was already done (by Axis Bank) they will sell the company in two months.

I was wondering if they can do the transaction without my approval. But I was told that in a merger plan, it requires 75% shareholder approval, then the remaining 25% have no choice but to follow. They (Kedaara Capital) have almost 50% stake and the remaining 25% they have to manage. They thought I will just resign and leave because my contract was not renewed, then they can just convince the other investors that the company will not have a future because I have left. Whatever hungama that is happening now, the other investors know that their investment is not safe, so they will feel it is better to support the merger and exit the company. Legally I cannot do anything. I have told Valiant (Mauritius Partners) already about the events but their concern is that I am not there in the company.

In the last month and a half they (Kedaara Capital) have been trying to instigate things against me. They have been writing all kinds of things about me through their operators. They were preparing the market, the employees and the other shareholders. Prior to all this, I had written to the board asking if my contract will be renewed soon. On Oct. 7, a board meeting was called and the chairman of the board just informed me that my resignation had been accepted, even though I never offered it. It was a shock of my life. I asked them why they were lying, but then the meeting was concluded without a clear decision taken. After that many meetings and discussions took place and then they convened another board meeting last month without me and I was informed that the board was not prepared to renew my contract.

During our discussions over the last one month, I told them (Kedaara Capital) that I don't think we can work together anymore. I don't have the capability to buy their stake, so I asked them to buy my stake. Then whatever power they need for decision making, they can have that. But they outright rejected this option.

I do not know, honestly. Since my resignation was announced, about 250 more people have resigned. This is a temporary thing. Spandana has been built over a strong foundation. Once the new CEO joins, the organisation will do well. But it all depends on the lenders' confidence. Since CDR (corporate debt restructuring in 2010), I have single handedly managed to raise Rs 20,000 crore from lenders to conduct our microfinance business. The lenders will likely wait and see how the new CEO is doing before they decide on future funding.