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Differences over strategic sale led to resignation of Spandana Sphoorty founder

MUMBAI: Padmaja Gangireddy, founder of Spandana Sphoorty Financial Ltd, the Hyderabad based micro lender, said she had to resign from her post of managing director as the board decided not to extend her employment contract beyond the current term.

The resignation was announced to the stock exchanges late on Tuesday.

In her email to the company, Gangireddy claimed that the move was an outcome of differences between her and the board led by private equity investor Kedaara Capital over the sale of the company to Axis Bank.

“I opposed underselling of (the) company to Axis Bank at a throw-away price. While other MFIs were acquired at 4.75x & 3.5x BV (book value) multiples in the past few months, Kedaara wanted to sell Spandana at 1.6x, which is one third of other Companies valuation,” she wrote.

“I very much wanted to continue as MD for few more years and limit my role to extending strategic direction to the company and the senior management team,” she added in the letter.

Gangireddy had founded Spandana in 1998. The microlender grew to become one of the most prominent MFIs in the country before facing distress due to the Andhra Pradesh microfinance crisis, which saw the lender ending up in corporate debt restructuring.

The lender emerged out of debt restructuring in 2017, raising $270 million in funding. Around $100 million came in the form of equity capital from a Kedaara Capital-led consortium including Ontario Teachers’ Pension Plan, and the rest in the form of debt capital from IndusInd Bank Ltd, Yes Bank Ltd, and ICICI Bank Ltd.

Spandana was one of five microfinance firms referred to the CDR cell after the Andhra Pradesh crisis.

The microlender went public in August 2019.

“When we exited from Corporate Debt restructuring in 2017, our portfolio was just 1,100 Cr. We grew the book by almost eight times in four years, which is a history. I don’t think that there is an example globally of a Company growing its networth to 3,000 Cr from negative 1,200 Cr,” she said in her email.

Spokespersons for Kedaara Capital and Axis Bank could not be immediately reached for a comment.

Earlier on Tuesday evening, the company said that its board has confirmed the hiring of an eminent industry veteran as its new managing director and chief executive officer, and the constitution of a management committee to provide strategic direction to the business operations in the interim as part of the transition plan.

“Mr. K. R. Kamath, former Chairman & Managing Director of Punjab National Bank and board member of Spandana, will chair the management committee, which also comprises two of longest-serving company board members Ms. Abanti Mitra and Mr. Kartikeya Kaji. The incumbent senior management team of Spandana, including the Chief Business Officer, Chief Risk Officer and Company Secretary will continue in their current roles, and manage the day-today operations of the company,” the company said in its statement.

According to a person close to the development who spoke on the condition of anonymity, Shalabh Saxena, MD & CEO of Bharat Financial Inclusion Ltd will be appointed as new CEO of Spandana.

“The newly hired incoming Managing Director & CEO of Spandana brings with him a wealth of experience across diverse financial services businesses, including leading one of India’s largest microfinance operations. He is currently serving his notice period at his current organization and is expected to join Spandana in the upcoming quarter,” the company had mentioned in its statement on Tuesday.

Spandana has also hired a new chief financial officer, who will join the company at a similar time, it added.

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