Spandana panel examining concerns raised about gold branches of subsidiary

Firm says combined portfolio of the named branches is less than 1% of Spandana's consolidated AUM, will not have a material financial impact

Following the exit of founder and erstwhile CEO Padmaja Reddy from Spandana Sphoorty, the management committee of the company's board, which is taking care of the firm's day-to-day operations, is now looking into its IT management, which was transferred to a new vendor, and the functioning of some gold loan branches of Spandana subsidiary Criss Financial Ltd.

The company said just prior to her exit, Reddy transferred the company’s IT systems to a new IT vendor and outsourced its management to that vendor. “There has been no meaningful impact on the day-to-day business operations of the company from this. However, to ensure a smooth transition and business continuity, Spandana is taking steps to engage with this new vendor appropriately and has also made good progress on creating a parallel IT environment,” the company said in a statement to the exchanges.

It has also highlighted that the board has been made aware of concerns raised regarding certain gold loan branches of the company’s subsidiary Criss Financial Limited and it is currently in the process of confirming the status of the issues raised. “The matter relates to its branches with a combined portfolio of less than 1 per cent of Spandana’s consolidated assets under management, and therefore would not have a material financial impact on the company,” it said.

A report by Economic Times said the company has hired an independent agency to probe the issues concerning the IT operations and operations of Criss Financial, indicating some wrongdoing. The report says the erstwhile CEO, Reddy, was invited to a board meeting to discuss the said issues, but did not attend.

Reddy had, in a letter, earlier alleged that the company's board was incompetent and the independent directors were working on behalf of Kedarra Capital, which owns 45 per cent in Spandana. Reddy had to step down as CEO of the company following her objection to Kedaara's bid to sell the firm to Axis Bank at Rs 700 per share, which she dubbed as underselling the company. “Despite Spandana being the highest profit-making NBFC MFI, having grown its book value eight times in four years, Kedaara tried to undersell the company at 1.6 book value multiple,” she had alleged in the letter.

Meanwhile, the company said in a statement on Monday that it has appointed Shalabh Saxena as the new managing director and CEO, and Ashish Damani as the President and chief financial officer of the company. Currently, both are associated with Bharat Financial Inclusion, a subsidiary of IndusInd Bank.

The bank in a notification to the exchanges clarified that neither Saxena nor Damani have tendered their resignation from the services at Bharat Financial Inclusion. “As per the terms of their employment, once the resignation is tendered, it is subject to acceptance by the board of directors. Upon acceptance by the board, a specified notice period is also required to be served. However, as neither of them have tendered their resignations, such due process has not been initiated,” the bank said.

It added that both Damani and Saxena are prohibited from accepting employment at a competitor of BFIL, unless approved in writing by the board of Bharat Financial Inclusion, as per their employment contract. Also, since certain transactions relating to Bharat Financial Inclusion are subject matter of an ongoing review hence, they cannot be relieved from the services of the company, until completion of the review, the bank said.