Explained: Allegations on ICICI’s CEO Chanda Kochhar (Part 2)


Explained: Allegations on ICICI’s CEO Chanda Kochhar (Part 1)

Part 2

Jack: Welcome home Jonnes..! Make yourself comfortable until I get you a cup of coffee, please..!

Jonnes: Sure my friend. By the way, did you see the news today..? The companies linked to the ICICI bank controversy are under the lenses of the Ministry of Corporate Affairs (MCA). I think, the ministry is looking into the allegations relating to fraudulent and undervalued transactions of the companies coming to light, RBI is the only authorised to interfere in the bank affairs.

Jack: Here is your coffee man, and yes, we need to continue with our left over discussion..! You know, I read an interesting concept yesterday, named ‘quid pro quo’ meaning ‘favour, in return of a favour’ in Latin, on which this case is dancing. And the companies involved are Mauritius based through which the money is routed to Nu Power Renewables (Deepak Kochhar’s company).

Jonnes: Is it..? No,no, I heard about the involvement of Essar Group in this perception. I don’t know it in detail, but something like that.

Jack: Yes my friend, let me share whatever I learned after we met. The Essar Group had two projects first US steel project in Minnesota and UK refinery at Stanlow.

ICICI bank had given loan to Essar Group for this in consortium of 7 other banks including SBI, Union bank, Canara bank, etc. The share of the ICICI bank was less than 25% of the total amount sanctioned. And now the two projects have become bankrupt. It is alleged that as a quid pro quo, the Essar Group then managed to make an investment in Nu Power Renewables, in the same period i.e, December 2010 to March 2012.

The Essar Group invested Rs.163 crores in Firstland Holdings which in turn invested Rs 324.37 crores in Nu Power Renewables. On the other hand, it invested a quantum in Matix Fertiliser and Chemicals Ltd as well.
Jonnes: So now, there are 4 companies involved in total –
1. Nu Power Renewables
2. Essar Groups
3. Firstland holding and
4. Matix fertiliser and chemicals Ltd.
But how did Firstland and Matix agree to enter the game? What is their interest?

Jack: I’ve even searched for that. Essar Group’s Vice chairman is Ravi Ruia and the two companies, Firstland and Matix are owned by his son in law, Nishant Kanodia. Moreover, Firstland Holdings is holding entity of the Matix Group, both registered in Mauritius. This is how Nu Power has received a round tripped investment, is what is supposed and alleged further. And all this happened in the same period i.e, between December 2010 and March 2012. The RoC documents also reveal that Nu Power received funding from Firstland Holdings.

Jonnes: But I heard that Deepak Kochhar denied all the allegations saying that Firstland subscribed to the compulsory convertible preference shares(CCPS) of Nu Power Renewables between July 2010 and September 2011, i.e, before December 2010, and has nothing to do with quid pro quo adjustments. Also that it was already informed to the company board in it’s EGM regarding the issuance of 0.001% CCPS to Firstland Holdings with a special resolution.

Jack: It’s true though, there’s a family relationship existing here. Nishant Kanodia is one of the Co-founders of Essar Groups. And after the heavy investment by Essar in Matix and Firstland, Matix again issues equity shares of Rs.10 each to Essar Capital Holdings incorporated in Mauritius. How do we analyse this then..?

Jonnes: See, while sanctioning the loans, as per the overall banking internal policies, ICICI bank also must have also taken into consideration the credit risk rating, credit appraisals and approvals. Hence, we can’t conclude yet that the bank or the senior management has any inappropriate motive behind the loan.

Jack: That’s the point to think over. The spokesperson of the Bank has informed that all the loans availed by ICICI to the Essar projects have been repaid and that the total exposure to Essar Group have reduced to Rs. 10000 crores from Rs. 30000 crores after Chanda Kochhar has chaired . The bank is really worried about it’s reputation along with that of the senior management.

Jonnes: It seems so..! We now should wait till the next week, when the court will give a valid judgement following the investigations.

Jack: Let’s enjoy the coffee till then, haha..!