Spandana Sphoorty Financial’s Founder and former Managing Director Padmaja Reddy plans to take her fight against Kedaara Capital to the Reserve Bank of India and the Securities and Exchange Board of India on the grounds that the proposed sale transaction with Axis Bank will impact investors.

Reddy, who recently stepped down as Managing Director of the microfinance company after she expressed her concerns over the firm’s valuation, told BusinessLine that she will write to SEBI and the RBI because the two regulators “have to safeguard the interest of each and every investor in this company. If Spandana has to be bought by Axis Bank, the RBI and SEBI have to approve the transaction.”

Reddy, who founded and built the company, has about 17 per cent stake in the company, while Kedaara holds 45 per cent.

Concern over valuation

“I opposed the valuation of the company for the transaction. It was at ₹700 per share, which was more or less the level we were trading at, but it was just 1.6 times the book value multiple,” she said.

“Since Spandana is a listed company, SEBI has a responsibility to safeguard the interests of all the investors. And, as Spandana and Axis Bank are regulated by the RBI, the transaction will require its approval also,” she said, stressing that the proposed transaction doesn’t require each and every shareholder’s approval but just 75 per cent of shareholders’ nod. She pointed out that when a similar microfinance company was acquired by a private sector bank in 2019, it was at 4.75 times book value multiple.

“That company is a little bigger than us and was not impacted by any crisis. But on any other parameter, be it in terms of quality, portfolio quality, and efficiency, profitability, Spandana is very much better. We should get at least 4 times,” she said, adding that she expects the deal with Axis Bank to continue.

Reddy said she is not considering any legal action over the non-renewal of her contract as Managing Director.

Also read: Upset over deal with Axis Bank, Spandana MD Gangireddy quits

“Under Company Law, it is the board which has to take a call on the appointment or reappointment of managing director,” she said.

She, however, continues to be on the board of the company as a non-executive director and is mulling over whether to resign from that position.

“They have not renewed my contract as managing director but I am still a non-executive director. But I am thinking about whether to continue or not. It doesn’t make any sense for me to continue as I am alone and I can’t influence any decision. It is only an obligation... they can use my name when it comes to lenders,” she said.

As a promoter, her shares in Spandana continue to under lock-in until August 2022, post the IPO.

Spandana Sphoorty had on November 2 announced a change in its leadership structure, following the resignation of Reddy and had confirmed the hiring of an eminent industry veteran as its new MD & CEO.

On November 10, ICRA placed the ratings of Spandana under watch with developing implications, citing Reddy’s exit.

“While the frequent churn in the senior management team was a concern, the recent exits, including that of the MD and CEO, is expected to have some impact on the normal operations in the near term,” ICRA had said.

On November 12, in a stock exchange filing, the microfinance player said it will be unable to submit its financial results for the second quarter of the fiscal by November 14, or 45 days from the close of the quarter, due to management changes.

“Our former managing director recently resigned. Immediately thereafter, our information technology team has also undergone attrition,” the company said.

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