Spandana Sphoorty: Fresh trouble brewing at Spandana Sphoorty: Padmaja Reddy to challenge preferential allotment to Kedaara Capital

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Microfinance lender Spandana Sphoorty Financial faces fresh troubles over fundraising as some minority shareholders get ready to challenge the plan to allot preference shares in favour of private equity firm Kedaara Capital, the principal investor with 45.5% holding.

Spandana founder and former managing director Padmaja Reddy, who along with her husband Vijaya Sivarami Reddy Vendidandi, owns 16.79 per cent, said she would soon write to market regulator Securities & Exchange Board of India (Sebi), seeking its intervention.

“Spandana is going to allot preference shares to Kedaara without doing proper valuation as required under the Articles of Association commitments,” Reddy told
ET.

The development comes barely within a year of PNB Housing‘s failed attempt to allot shares to American private equity firm Carlyle Group and make it a majority shareholder of the home financier.

“Spandana does not need equity as it has high capital adequacy while its business shrank significantly,” Reddy said. “If the company still wanted to raise capital, it should have gone for a rights issue. Strangely, as mentioned in the notice to shareholders, the price at which the preferential allotment is planned was not even discussed at the board meeting,” she said.

Earlier on Wednesday, Spandana said it would like to complete its proposed Rs 300-crore fundraising by March, with promoter Kedaara Capital and long-term shareholder Valiant helping boost the capital base.

Both investors were expected to subscribe to stock in the preferential allotment at Rs 459 per share, which is at a 21% premium to the financier’s Wednesday closing price. Kedaara holds shares in Spandana through a special purpose vehicle called Kanchenjunga Ltd.

Responding to ET’s query, the Board of Spandana Sphoorty issued a statement saying the decision was taken keeping the company’s strategic growth in mind. “The company evaluated all the various options, and concluded that a preferential issue was the optimal choice given the market conditions and timelines.”

The pricing of this issue was based on the SEBI-regulated pricing formula and the assessment of an independent third party valuer. We believe that this is in the best interest of all of the company’s stakeholders,” the statement said.

Reddy however said that the company has merely put up a report by an obscure valuer which merely mentions the floor price without valuing the company and benchmarking it with the listed peers.

The lender, in the meantime, is in the process of seeking shareholders’ approval through e-voting, which commenced on February 15 and will continue until March 16. The results of the remote e-voting will be declared on March 17.

It is looking to issue equity shares on a preferential basis to Valiant Mauritius Partners Ltd, Valiant India Opportunities Ltd and Valiant Mauritius Partners Offshore Ltd. It would also issue equity shares and fully convertible warrants on a preferential basis to Kedaara Capital Fund III LLP.

The lender reported a consolidated net profit of Rs 45 crore for the December quarter, as compared with Rs 28 crore loss in the year ago period. It had also posted a loss of Rs 58 crore in the September 2021 quarter.

Its assets under management shrunk as much as 18 per cent to Rs 6695 crore at the end of December from Rs 8157 crore nine months prior to that. The company has been in a turmoil ever since Reddy resigned on November 2 last year following a tiff with Kedaara Capital on its plan to sell the company to Axis Bank.

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