In an evolving new story that we're following here at Moneycontrol, the main players are ICICI Bank, MD and CEO Ms.Chanda Kochhar, the husband of Chanda Kochhar that is Deepak Kochhar and Promoter of Videocon group, Venugopal Dhoot .
The Indian Express has reported allegations of a Quid Pro Quo in sanctioning of 3250 crore rupees worth of loans to the Videocon group. To counter these allegations, the board of ICICI bank on Wednesday backed the MD and CEO Chanda Kochhar, saying that no individual employee irrespective of his or her position, has the ability to influence a credit decision at the bank .In a statement to the stock exchanges, the ICICI Bank said the board concluded that there was no question or scope of any favouritism, nepotism of Quid Pro Quo. The bank also urged the public to not be misled by the rumours which are being spread, they said, to malign the bank and its top management. The statement released by the bank also went on to say that the bank has a well structured and standardised credit approval process where multiple independent departments are involved in providing independent credit risk taking and that there are adequate checks and balances in loan appraisal, rating and approval processes within the bank both from the control as well as from a governance perspective. The statement also went on to say that ICICI bank was not alone in this current exposure to Videocon group, according to them in 2012, it was a consortium of over 20 banks and Financial Institutions which sanctioned facilities to the Videocon group to the tune of approximately 40000 crores for the group’s oil and gas capital expenditure program. The current exposure of 3250 crore rupees was part of this syndicated consortium arrangement. The statement also went on to note that ICICI bank was not in fact the lead bank for this consortium and the bank only sanctioned its share of facilities aggregating to 3250 crore rupees which they said was less than 10% of the total consortium facility in April 2012.
The credit committee of ICICI bank in 2012 sanctioned its share of facilities in this syndicated arrangement and the statement went on to note that it was not Ms.Chanda Kochhar who was the chairperson of this committee. The bank also desire to clarify that none of the investors of NuPower Renewables were borrowers of ICICI Bank. In the last paragraph of the statement the bank went on to emphasize and I quote, “On looking at all of these facts the board has come to the conclusion that there is no question of any Quid Pro Quo or nepotism or conflict of interest as is being alleged in various rumours. The board has full confidence and reposes full faith in the bank MD and CEO, Ms. Chanda Kochhar. The board also commends the entire management team under the leadership of the MD and CEO for their hard work and dedication. We would urge you not to be misled by these rumours which are being spread to malign the bank and its top management”.
Well this is an evolving new story as it was broken by the Indian Express. To give you a sense of what the timeline of these allegations as reported by the express are, let's start in December 2008. Deepak Kochhar the husband of Ms.Chanda Kochhar and Venugopal Dhoot a promoter for Videocon, setup NuPower Renewables Private Limited. Mr Dhoot held 50% stake in the company with his family members and associates, Mr Deepak Kochhar and Pacific Capital, which is owned by Deepak Kochhar’s father and Chanda Kochhar’s brother's wife held the remaining 50%.
In January 2009, Mr.Dhoot resigned as the director of NuPower and transfered his 24,999 shares in the company to Mr.Kochhar for rupees two and a half lakh. A year later, in March 2010, NuPower got a loan of 64 crore rupees as a fully convertible debenture from a company called Supreme Energy Private Limited which was 99.9% owned by Mr. Dhoot.
Following a sequence of transfer of shares from Dhoot to Kochhar and then from Kochhar and his relative’s Pacific Capital to Supreme Energy, Supreme Energy became a 94.99% shareholder in NuPower by the end of March 2010. Mr. Kochhar held the remaining 4.99% stake in NuPower at the time.
In November 2010, later that year, Mr.Dhoot transfered his entire holding in Supreme Energy to his associate Mahesh Chandra Punglia.
2 years later, beginning September 29 to April 29, 2013, Mr Punglia transfered his holding to Pinnacle Energy which is a trust where Mr Deepak Kochhar was the managing trustee. The total transaction value of the complete transfer of shares from Punglia to Kochhar’s Pinnacle Energy trust was 9 lakh rupees.
In effect and I quote the report by the Indian Express Supreme Energy gave a loan of 64 crore rupees to NuPower and then got subsumed by Pinnacle Energy within 3 years.
The queries is raised here are about financial transactions, share transfers between Dhoot, the promoter of Videocon companies, Videocon companies and companies run by Mr.Deepak Kochhar, the husband of the MD and CEO of ICICI Bank,at the heart of the questions raised here is the issue of conflict of interest.
So, to summarise multiple reports have been circulating in online blogs and social media in India last week alluding to the alleged conflict of interest in ICICI’s lending to Videocon alleging that the conglomerate was favoured by the bank’s MD and CEO Chanda Kochhar as a Quid Pro Quo for her husband's transactions with Mr.Dhoot. ICICI bank has thrown its weight behind the MD and CEO and has urged its investors quote unquote not to be misled by these rumours. This is of course an evolving story and we will of course keep you abreast of the latest developments. Thank you joining us on Moneycontrol.
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