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ESFG owned 20 per cent stake in Banco Espirito Santo SA, the Portugese bank whose problems eventually required a 4.9 billion euro bailout earlier this year. The bailout also resulted in splitting the bank into two, one which contained all the toxic assets which led to the fall; and a second bank with sound assets-a 'good bank.'
Subsequently, ESFG declared bankruptcy on Thursday after a court rejection of a request for time to sell assets in a slow and orderly manner, according to international media reports. ESFG does not have any relation with Espirito Santo India Securities, said a spokesperson.
"We are a subsidiary of Espírito Santo Investment (ESIB) which is wholly owned by Novo Banco (i.e. the good bank). Post the restructuring of BES into Novo Banco which is 100% owned by the Portuguese Resolution Fund, ESFG does not have any direct or indirect shareholding in Espírito Santo Investment Bank or it's subsidiaries," it said in response to a Business Standard query.
The Portugese central bank noted that the fallen bank had been involved in irregularities involving lending to other group companies which eventually resulted in losses that caused it to fall short of minimum solvency ratios.
"The results disclosed on 30 July 2014 reflect the practice of management acts seriously detrimental to the interests of Banco Espírito Santo, S.A. and the violation of determinations of Banco de Portugal that prohibited an increase in the exposure to other entities of the Grupo Espírito Santo."
The European Commission in a statement following the decision to bail out the bank, said that the move to split the bank was necessary to avoid risk of 'serious disturbance' to the Portugese economy.
"In its assessment, the Commission acknowledged that a disorderly resolution of BES could create a serious disturbance in the Portuguese economy and that the creation of the Bridge Bank is suitable to remedy that disturbance. The measure allows for the maximisation of the value of the assets and minimises the cost for the Resolution Fund. Furthermore, in order to limit distortions of competition, the new business by the Bridge Bank will be limited and a prudent pricing policy will be implemented," it said on August 4th.
MG Burmans Capital Advisors took a 25 per cent stake in Espirito Santo Securities India (ESSI) in November 2011. MG Burmans Capital Advisors is the investment arm of the Burman family who own consumer goods company Dabur.
Meanwhile, the Wall Street Journal reported that the India arm has been sounding out potential buyers. The company declined comment.
Highlight Box:
Troubled waters:
Banco Espirito Santo SA collapses, requires 4.9 billion euro bailout in August
Bank split into two, one arm with the toxic assets and another 'good' bank
Espirito Santo Financial Group SA(ESFG) owned 20 per cent in Banco Espirito Santa
It too declared bankruptcy on 9th October after Court rejected request for time to sell assets in a slow and orderly manner
Espirito Santo India Securities says firm is part of good bank
No direct or indirect shareholding of ESFG
International media reports say Indian firm scouting for buyers
