Central Bank ups exposure to Deepak Kochhar's NuPower despite default

The financial metrics of NuPower Renewables Pvt Ltd, a company set up by Deepak Kochhar, deteriorated by December 2015 to such an extent that the company started defaulting on its loans. 

However, despite the default, government-owned Central Bank of India increased its exposure in the company and bought a loan worth Rs 1 billion from Axis Bank in 2017-18.

Deepak Kochhar is married to ICICI Bank Managing Director and Chief Executive Officer Chanda Kochhar.
  

Filings with the Ministry of Corporate Affairs (MCA) show that NuPower had to hive off its businesses into two companies and refinance its debt in 2015. After the refinancing, government-owned Central Bank of India, Axis Bank and Canara Bank, had the largest exposure in NuPower and its subsidiaries, even though other private sector banks and entities slowly reduced their exposure. 

As on March 2017, Central Bank of India had an exposure of Rs 3.32 billion, while Axis Bank had an exposure of Rs 3.89 billion in NuPower. Canara Bank had an exposure of Rs 880 million. 

Axis Bank reduced its exposure in Echanda Urja Pvt Ltd, a subsidiary of NuPower, by Rs 2 billion to below Rs 3 billion, and an insider said the rest of the debt will also be sold in due course. At its peak, Axis Bank had an exposure of Rs 5 billion in the company. NuPower’s total debt was Rs 8.34 billion, as on March 2017.

Interestingly, Indiabulls Housing Finance also had an exposure of Rs 250 million in the company. 

 

While Central Bank of India did not comment on NuPower loans, an insider said the loans were approved by the bank’s board. An e-mail sent to NuPower did not elicit any response.

While putting its debt instruments in the default category, rating agency Care had said in December 2015 that the revision in the rating assigned to the bank facilities of NuPower worth Rs 4.64 billion took into account the delay in debt servicing. 

CARE said it had withdrawn the rating assigned to the bank facilities of NuPower consequent to the company’s transfer of its main business to Echanda Urja, which was operating a 100-megawatt (Mw) wind power plant in Tamil Nadu. 

These loans were subsequently refinanced. The rating was again restored from default category. In 2015, Nupower hived off 34-Mw capacity into another subsidiary. 
 

Interestingly, NuPower Renewables received a good valuation report from Price Waterhouse in February 2017 based on which DH Renewables, a Mauritius-based entity, converted its compulsorily convertible cumulative preference shares (CCPS) into equity a month later in NuPower, raising its stake to 55 per cent in the company. 

Since the infusion, NuPower's financial fortunes improved. The company made a loss of Rs 62 million on revenues of Rs 2.10 billion in 2016-17, compared to a loss of Rs 1 billion on revenues of Rs 1.63 billion in the previous fiscal. According to CARE ratings, NuPower’s reported operating income of Rs 1.82 billion in the first nine months of 2017-18 and made a profit of Rs 350 million (see chart).

NuPower is currently facing investigation from multiple government agencies, including the MCA, the Securities and Exchange Board of India, the Enforcement Directorate and the income-tax department, for alleged quid pro quo between ICICI Bank and its clients. 

The probe by other agencies and regulators started after the Central Bureau of Investigation (CBI) launched a preliminary enquiry into NuPower getting a Rs 640-million loan from Videocon Industries after ICICI Bank extended a Rs 32-billion loan to the latter in 2012.  The probe will cover all entities related to NuPower and its promoters, including Pacific Capital Services, Pinnacle Trust and Supreme Energy. 

The investments by the Kanodia family of Datamatics into NuPower’s CCPS via a Mauritius-based entity is also under the scanner. The Kanodias invested Rs 3.25 billion in NuPower in 2011 and 2012, and exited two years later without making any profit or loss.