Spandana Sphoorty probing issues at gold branches of subsidiary: Committee

Company appoints Shalabh Saxena as new MD&CEO, says it is probing IT management contract given by former executive.

A committee managing Spandana Sphoorty after founder and former CEO Padmaja Reddy quit the microfinance lender is reviewing the transfer of IT operations to a vendor and the functioning of some gold loan branches of a subsidiary called Criss Financial Limited.

Reddy, before leaving, outsourced the company’s IT systems management to a new vendor. “There has been no meaningful impact on the day-to-day business operations of the company from this. However, to ensure a smooth transition and business continuity, Spandana is taking steps to engage with this new vendor appropriately and has also made good progress on creating a parallel IT environment”, the company said in a statement to the exchanges.

The company said its board is aware of concerns raised about the gold loan subsidiary. “The matter relates to its branches with a combined portfolio of less than 1 per cent of Spandana’s consolidated assets under management, and therefore would not have a material financial impact on the company”, it said.

The Economic Times reported that the company has hired an independent agency to probe the issues concerning the IT operations and operations of Criss Financial. The newspaper said Reddy was invited to a board meeting but she did not attend.

Reddy, in a letter, had alleged that the board was incompetent and the independent directors were working on behalf of Kedarra Capital, which owns 45 per cent in the company. Reddy stepped as the CEO after objecting to Kedaara's bid to sell the company to Axis Bank at Rs 700 per share, which she dubbed as under selling the company. “Despite Spandana being the highest profit making NBFC MFI and has grown book eight times in four years, Kedaara tried to undersell the company at 1.6 book value multiple”, she alleged.

The company said on Monday it has appointed Shalabh Saxena as its new managing director and chief executive officer (MD&CEO). Ashish Damani will be the president and chief financial officer. Currently, both of them are associated with Bharat Financial Inclusion, a subsidiary of IndusInd Bank.

The bank, in a notification to the exchanges, said that neither Saxena nor Damani have resigned Bharat Financial Inclusion. “As per the terms of their employment, once the resignation is tendered, it is subject to acceptance by the board of directors. Upon acceptance by the board, a specified notice period is also required to be served. However, as neither of them have tendered their resignations, such due process has not been initiated”, the bank said.

It said Damani and Saxena are prohibited from accepting employment at a competitor of BFIL, unless approved in writing by the board of Bharat Financial Inclusion, as per their employment contract.