| YES Bank tussle: Board to meet today |
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Kolkata/ Mumbai, 26 June The cool environs of Mumbai's Nehru Centre, where the YES Bank headquarters is located, might not be enough to stop many people from sweating tomorrow. And, it's not members of the media alone who will be there in full force to cover the meeting of the seven- member board to discuss whether to induct Shagun Kapur Gogia. Questions have already been raised on director appointments and claims have been made on violation of co- promoter's rights. And even before the board meeting starts, exchange of words has started after Gogia filed her nominations last week. YES Bank asked Gogia to refile her nominations in the ' revised RBI format'. A public dispute has started over board membership in the country's youngest bank and the hastily arranged board meeting is one of the consequences. It was originally scheduled for July 24 but the high court ( HC) here had asked it be brought forward. Three weeks earlier ( June 6), Madhu Kapur, widow of cofounder Ashok Kapur, and her children, Gogia and Gaurav Kapur, moved the HC for a stay on the annual shareholders' meet and contesting the appointment of three directors Diwan Arun Nanda, Ravish Chopra and M R Srinivasan —on the board. The Kapur family felt efforts were being made to erase his contribution to the bank he promoted with brother- in- law Rana Kapoor. Rana's wife, Bindu, and Madhu are sisters. It was alleged that after Kapur's death ( in the November 2008 Mumbai terrorist attack), his legal heir Madhus right to jointly nominate directors on the board, in line with the bank's articles of association, was violated. Two of the three directors, Chopra and Srinivasan, were recommended by Rana and the Kapur family was not consulted. Prior to this, in 2009, the bank had rejected Madhu's verbal request to induct her as a board member. In 2011, it removed her name from the list of major shareholders. On June 5, Madhu made a fresh request to allow her to nominate her daughter, Gogia, on the board. The next day, at around 4 pm, she moved the HC and an hour or so later, got a reply from Rana Kapoor that her request would be discussed in the next board meeting in July. While the court refused to grant astay on the annual general meeting, where a majority of shareholders voted in favour of the three directors' appointment, it directed the bank to advance its board meeting by a month and consider Gogia's induction. The outcome has to be reported to the court on the coming Monday. The crucial factor in Gogia's appointment is the " fit and proper" guidelines of the Reserve Bank of India ( RBI) that banks need to follow while inducting a new director on the board. A circular issued by RBI on June 20, 2002 defined these as formal qualification, experience, track record, integrity, etc. It said the candidate should be a graduate, between 35 and 65 years of age, and not be a member of Parliament, alegislative assembly or legislative council. On June 25, 2004, RBI issued another circular that banks should undertake a process of due- diligence to determine the suitability of the person for appointment as a director on the board, based upon qualification, expertise, track record, integrity and other fit and proper criteria. Based on these guidelines, it appears that Gogia fits the bill. She is a double major in economics and biology from Tufts University, US, and an MBA from the Indian School of Business, Hyderabad. She has worked with ICICI Ventures and Rabo India Finance before setting up an investment firm, Tuscan Ventures. However, a few suggest that RBI's guidelines on ownership and governance in private sector banks might prevent her appointment. The norms, released on February 28, 2005, state: " As a matter of desirable practice, not more than one member of a family or a close relative ( as defined under Section 6 of the Companies Act, 1956) or an associate ( partner, employee, director, etc) should be on the board of a bank." While Gogia is related to Kapoor, experts say they are not "close relatives" as defined by Section 6. " The Act does not define uncle and niece as close relatives. Also, Shagun and Rana are not members of the same family. The idea to restrict family members or relatives on a banks board is to prevent them from acting in concert. In the current situation, it is difficult to imagine that Shagun and Rana will be acting in concert," said atop executive of a global consultancy firm. Still, doubt remains over her appointment. " A majority of board members might not be too keen to appoint someone who has moved the court against the bank," said a person familiar with the development. Gogia has quit Tuscan Ventures to avoid any conflict of interest. She had filed her nomination on June 17, 2013 but had to re- file after the bank asked her to give it in RBI's prescribed format. It is to be seen if the board now decides to accept her. RBI guidelines on ' fit and proper' criteria for board- level appointments will be in focus Rana Kapoor Madhu Kapur BOARD BATTLE A public dispute has started over board membership in the country's youngest bank with deceased co- founder Ashok Kapur's family moving the Bombay High Court against YES Bank. A hastily arranged board meeting on Thursday afternoon is one of the consequences On rejecting application of late Ashok Kapur's wife Madhu to be placed on YES Bank board in 2009 >Rana Kapoor: Itwas discussed bythe board atthattime. Itwas found not in accordance with the ' fitand proper' guidelines ofthe Reserve Bankof India and the board decided to rejectit. >Shagun Kapur Gogia: We were noteven aware thatthe candidature was discussed atthe board level. There have been no formal communication on the matter to us. On proposal to appoint Shagun Kapur Gogia on YES Bank board >Rana Kapoor: We offered her a resolution thatitwould be discussed in the nextboard meeting ( originallyscheduled on July24, 2013). >Shagun Kapur Gogia: The question is notofmynomination to the board. The issue is on acknowledging our rights as partner. On Madhu Kapur/ Shagun Kapur Gogia's eligibility to become a board member >Rana Kapoor: Bankgovernance is completelydriven byRBI's regulations and notbythe shareholders. YESBankhas always adhered to the guidelines ofRBI while appointing directors on its board. >Shagun Kapur Gogia: I have been in the finance industryall along. I have done a managementprogramme from Indian School ofBusiness and also worked with ICICI Ventures. I have floated Tuscan Ventures, a familyoffice, thatlooks atinvesting in businesses On the dispute >Rana Kapoor: Itis a one- sided dispute. >Shagun Kapur Gogia: The articles ofassociation provides for (director) nomination to be done jointlybythe Indian partners ( Rana Kapoor and AshokKapur's family). We were notpartyto it On violation of articles of association >Rana Kapoor: The articles of association is the opening position ofthe bank. There have been subsequentregulations after the bankwas formed and those rules have to be dovetailed >Shagun Kapur Gogia: Our issue is to establish the procedure for the implementation ofour nomination rights under the articles ofassociation Source: News reports |
| Buyback failure to bite deep |
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Mumbai, 26 June In the past two- and- a- half years, athird of the 37 companies offering to buy back their shares could not meet 50 per cent of their offer size, a criterion set now for such offers by the Securities and Exchange Board of India ( Sebi). Sebi yesterday tightened the share buyback rules further, also raising the cool- off period for raising further equity capital from six months to 12 months after completion of a buyback offer. "The number of buyback offers are likely to go down, as the companies will now have to have an 18- month view for cash requirements in volatile market conditions," says Sudhir Bassi, executive director at corporate law firm Khaitan & Co. The buyback offers are to be completed within six months of the announcement. Companies ideally buy back shares when they have cash which they do not expect to deploy in the business for better returns. Since the buyback brings down the number of shares in the market, it helps to boost earnings per share and, hence, the share price. "While the checks and balances introduced by Sebi are aimed at protecting the interests of the investor community, it appears these changes could lead to serious ramifications on the buy- back process at large," said Nishith Desai, founder and managing partner of corporate law firm Nishith Desai Associates. "Companies may now have to think twice before undertaking a buy back process with these stricter conditions being introduced," he added. Sebi is concerned when companies use a buyback offer to boost their stock and not to reward the shareholder. A company could earlier make abuyback offer to boost the share price and, if required, raise equity capital after six months, using various instruments such as qualified institutional placement or preferential allotment. Now, however, they'll have to pay 2.5 per cent of the buyback amount as penalty if they are unable to meet 50 per cent of the offer size. Data from financial research company Capitaline shows 13 of the 37 companies making that made open offers since January 2011 did not meet half their offer size. This includes Reliance Industries and Reliance Infrastructure, which respectively closed their offers in 2013 and 2012. The penalty in the case of RIL, which closed its buyback offer after meeting 38.5 per cent of the size, would have been ₹ 261 crore, and ₹ 25 crore for R- Infra had they made the offer under the current guidelines of the regulator. "Companies will now have to also analyse the liquidity of their shares in the markets carefully before deciding on the size of the buyback offer," says Hemal Uchat, executive director at consulting firm PricewaterhouseCoopers. NSEBI MEET: PROS AND CONSN Since January 2011, a third of firms making such offers failed to meet new floor; current penalties would have been hefty TOP 10 BUYBACK SINCE JAN 2011 Company Buy back Proposed Proposed Average Shares Aggregate % of 2.5% name price(~) buy aggregate buyback bought amount Buyback penalty* (mn shrs) Amt(~ cr) price (~) ( mn shrs) utilised (~ cr) ( shares) Reliance Inds. 870.00 120.00 10,440.00 726.68 46.25 3,366.64 38.54 261.00 Reliance Infra. 725.00 13.79 1,000.00 528.91 4.43 234.32 32.12 25.00 Indbull. RealEst. 75.00 60.00 450.00 54.64 50.00 273.20 83.33 0.00 Amtek Auto 200.00 14.55 291.00 144.00 14.55 187.01 100.00 0.00 United Phosp. 150.00 19.20 288.00 116.40 19.20 223.49 100.00 0.00 Zee Enter. 140.00 20.00 280.00 123.34 4.81 5.93 24.06 7.00 DE Nora India 105.00 0.25 258.83 104.75 0.25 258.83 100.00 0.00 Balrampur Chini 85.00 12.94 109.68 71.17 15.41 109.68 119.08 0.00 Monnet Ispat 500.00 2.00 100.00 420.00 0.61 19.65 30.31 2.50 JK Lakshmi Cem. 70.00 13.9 97.50 64.99 4.69 30.47 33.73 2.44 *Indicative Penalty not actual to be paid Source Capitaline Compiled by BS Research Bureau |
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