Sebi lens on Rajiv Kochhar's Avista Advisory clients in ICICI loan case

Regulator to check end use of funds raised by companies that availed Rajiv Kochhar-led firm's services

Listed companies that availed of services from the Rajiv Kochhar-led Avista Advisory have come under regulatory glare.  According to sources, the Securities and Exchange Board of India (Sebi) is likely to examine the end-use of funds and other securities law compliance by these companies -- including Suzlon, GTL Infra, Jindal Stainless and Sterling Biotech.

These companies had employed Avista Advisory—owned by Rajiv Kochhar, brother-in-law of ICICI Bank managing editor Chanda Kochhar—for loan restructuring and other corporate needs.

Sources say Union finance ministry officials met Sebi chairman Ajay Tyagi last week on the issue. 

The Centre has asked the markets watchdog to examine compliance, disclosures and any conflict of interest at these firms. Sebi has been asked for a report in a month. The Centre has also asked Sebi if further tightening is needed to monitor companies’ loan recast and other fund raising avenues. 

The move came after the Videocon loan controversy. In 2008, Videocon group chairman Venugopal Dhoot set up NuPower Renewables as an equal venture with Chanda Kochhar’s husband, Deepak Kochhar. 

He lent Rs 6.4 million to the company and eventually transferred his stake to Kochhar. The transfer was six months after the Videocon group got a loan of Rs 32.5 billion from ICICI. 

Almost 86 per cent of that loan (Rs 28.1 billion) remains unpaid and the account was declared a non-performing asset (NPA) in 2017.

Every listed company has to disclose to its investors how they utilise the money raised through means such as an initial public offer of equity (IPO) or private placements. However, listed firms are not bound to disclose debt restructuring plans to Sebi. Debt restructuring is a tool to aid borrowers in distress, owing to circumstances beyond their control such as an economic or business downturn. 

Experts say in the recent past there have been several instances of gross misuse by companies of the facility extended by banks. “Typically, every bank has a separate project monitoring team, who supervise and keep a close watch on fund flows. But, in some cases, they are failing in analysing the company intention for availing of such a facility,” said a banking sector expert.

On May 23, Sebi issued showcause notices to ICICI and Chanda Kochhar for not divulging the Videocon transaction which involved her husband. The bank and she were asked to respond within 14 days. Avista has been under investigative agencies' radar for allegedly acting as a loan syndicator, which got a commission on every deal. 

Rajiv Kochhar is alleged by sources to have helped ICICI in restructuring foreign currency convertible bond deals for at least seven companies. 

The combined value of these was $1.7 billion. 

The deals included those of Videocon and other blue-chip companies. Avista has reportedly earned Rs 1.08 billion in the past four years. People in the know said that Sebi might also collate information regarding the role of the credit committee that approved the loan to these firms.