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While Rana Kapoor, co-founder and CEO of Yes Bank Ltd., is preparing to leave office in two months, both his bank and himself have been the subject of close scrutiny .
On Tuesday, the rating agency Moody's Investors Service lowered the bank's rating due to corporate governance issues. The agency cited recent resignations from the bank's board as one of the triggers for the downgrade.
Other governance issues have also emerged. Among them is the overlapping activities of the Kapoor family and Yes Bank.
Promoting Entities
Rana Kapoor is one of Yes Bank's two "Indian Partners" and holds a 10.67% interest.
According to Yes Bank's annual report for 2017-2018, Rana Kapoor owns 4.34% of the bank. Two promoters hold the rest – Yes Capital (India) Pvt. Ltd. holds 3.28% and Morgan Credits Pvt. Ltd. holds 3.05 percent.
The sponsoring entities, however, cover a range of activities, some of which overlap with those of the lender.
For example, Yes Capital's 2017-2018 annual report reveals significant results. investments in a subsidiary called ART Capital (India) Pvt. Ltd.
In 2017-18, Yes Capital invested 522 million rupees in shares of ART capital. In 2016-2017, Yes Capital invested the capital of ART Capital in 7.5 crore rupees.
Yes Capital raised 630 crore rupees through the issuance of debentures, subscribed almost entirely by Franklin Templeton Investment Management Company, for this investment in ART Capital. . The newspaper Economic Times reported it for the first time in an article published Wednesday
Businesses of ART Capital
ART Capital still has not filed its annual report for 2017-18 with the Registrar of Companies. However, the company's 2016-2017 annual report indicates that it is registered as an investment company. Rakhee Kapoor Tandon and Roshni Kapoor, two of Rana Kapoor's daughters, run the company and signed the annual report. Rana Kapoor is not on ART Capital's list of directors.
The annual report lists 14 ART Capital subsidiaries engaged in a multitude of financial activities. This includes:
- ART Affordable Housing Financing Ltd.
- ART Business & Consumer Finance Ltd.
- ART Corporate Finance Ltd.
- ART Special Situations Finance Ltd.
- ART Financial Services Ltd.
- ART Real Estate Finance (India) Private Ltd.
In 2016-2017, ART Capital recorded a loss of 2.26 million rupees compared to a loss of 5.76 million rupees in 2015-2016.
While ART Capital's annual report for 2017 -18 is not available, Yes Capital's annual report for 2017-2018 reveals an underlying exposure of 375 crores of housing finance companies. The previous year, this exposure to housing finance amounted to 115 crowns, according to the annual report.
Morgan Credits, which is also one of the promoters of Yes Bank, owns a set of non-financial renewable energy activities for the benefit of horticulture and agricultural technology.
Although there is nothing illegal about the family of a bank promoter engaging in activities in conflict with the bank's activities, this raises a question of conflict of interest, said the independent badyst Hemindra Hazari.
"You could have a conflict of interest. The money is fungible. You do not know where he was raised, where he was deployed … You are now in a gray area, "Hazari told BloombergQuint in an interview Wednesday.
Transactions between family businesses and the bank?
The crucial question is whether there was any relationship between the family businesses and the bank.
The question was asked in an anonymous letter sent to stock exchanges in September. The bank, however, has denied any relationship with the family offices.
In a September 26 petition, NSE asked if "parallel loan / investment activities are being managed by Mr. Kapoor's family office, thereby jeopardizing Yes Bank's interests. . In response, the bank said it did not have contact with the Three Sisters Family Office.
The bank reiterated this position in response to a request for exchange made on Wednesday, November 28th. This request was to clarify a Economic Times article regarding the use of debt funds as equity in private finance companies. In response, the bank indicated that it did not participate in the management of ART Capital or Yes Capital funds. She added that the bank had no relationship with these two companies, except to the extent that Yes Capital and Morgan Credit were sponsoring entities.
The issue was also raised by rating agencies in conversations with bank management, according to people familiar with the issue.
In response to a request from BloombergQuint to find out whether family businesses had entered into badet purchase transactions with bank borrowers, Rana Kapoor's family businesses purchased badets from bank borrowers. the bank. Yes, the bank said that all bank activities were conducted according to internal processes.
In his response, the lender added: "The Bank's board of directors, through its various credit management committees, directs its boards and subcommittees. periodic reviews of clients / borrowers on a regular basis, which is also subject to regulatory review. "
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