The Spandana Board has accepted his resignation with immediate effect. It will appoint a reputable industry veteran as its new MD and CEO, and create a new management committee, it announced in a stock exchange filing late Tuesday.
It revives the poignant memories of Vikram Akula, the founder of SKS Microfinance, who dropped out more than a decade ago following issues with investors. SKS, now known as Bharat Financial Services, has been acquired by IndusInd Bank in July 2019.
Reddy confirmed the matter while talking to ET. Kedara Capital did not immediately respond to ET’s query.
“The board, led by investor ‘Kedara’, decided not to extend my employment contract beyond my current term as Managing Director,” Reddy wrote in a departure email addressed to Spandana employees.
“I objected to Axis Bank selling the company at a reduced price,” she said.
ET has seen the copy of the email.
“While other MFIs were acquired over the past few months at 4.75x and 3.5x book value multiples, Kedara wanted to sell Spandana at 1.6x, which is a third of the valuation of other companies.”
Spandana has an estimated loan portfolio of Rs 8,000 crore.
He said the merger proposal between Spandana and Axis Bank was made at a valuation of Rs 700 crore. According to him, it was significantly “undervalued”.
With Reddy exiting, the process of merger with Axis Bank may ease as Kedara is likely to garner the three-fourth shareholder majority required for the merger approval.
A few months ago, Bharat Financial’s Shalabh Saxena was projected as the future CEO of Spandana, a document submitted to Axis Bank to sell, said people familiar with the matter. He is currently the MD and CEO of Bharat Financial Inclusion, a wholly owned subsidiary of IndusInd Bank. Saxena could not be immediately reached for comment.
Reddy holds 17 per cent stake in the company. Kedara holds 45 per cent stake. His term was to end on April, 2022.
About four-and-a-half years ago, Spandana Sporti Financial, a Hyderabad-based microfinance institution, had Rs 650 crore in equity capital from a consortium led by Kedara Capital and Rs 1,100 crore in debt capital from IndusInd Bank, Yes Bank and ICICI Bank.
Spandana was one of those MFIs who had to bear the brunt of the Andhra Pradesh MFI crisis a decade ago.
It went through a debt restructuring program, which helped the company regain financial health since 2017. Immediately after exiting debt restructuring, the company had a portfolio of Rs 1,100 crore.
Reddy, who founded Spandana in 1998, said, “We have grown the book nearly eight times in four years, which is a history.”