ICICI Bank Loan of 3250 Cr Loan to Videocon a mockery of Indian Banking lending. Promoter Venugopal Dhoot forms JV with Chanda Kochhar’s husband under scanner!

The board of directors of ICICI Bank decided to back MD and CEO Chanda Kochhar against allegations of quid pro quo in the ICICI-Videocon deal on the basis of an internal evaluation carried out by Chairman MK Sharma, according to sources in the know. No third party or external consultancy, accounting or forensics firm was hired to present its findings before the board. Propriety demands that the process should have been evaluated and vetted by a third party instead.

Sharma’s findings put before the short notice board meeting on March 28 were the same that he conducted in 2016. It is believed that at that time, Sharma had evaluated the bank’s credit evaluation process right after whistleblower Virendra Gupta’s disclosures in 2016 regarding the Rs 3,250 crore and Rs 660 crore loans and alleged quid pro quo in the form of an identical 10 per cent foreign funding in Kochhar’s husband Deepak Kochhar’s company NuPower Renewables.

Deepak Kochhar and Videocon promoter Venugopal Dhoot had together set up a 50:50 JV NuPower Renewables in 2008. These revelations led to allegations of propriety and conflict of interest.

Sharma is believed to have evaluated lead arranger SBI Capital’s proposal, the due diligence carried out by SBI and co-lead IDBI as well as the internal proposals put up within ICICI. He also evaluated the notes of the consortium meeting and sanction by ICICI’s credit committee, which included Chanda Kochhar.

Sharma’s presentation to the board is also believed to have concluded that ICICI’s credit evaluation process was so robust that no person, however, high up he/she may be, was in a position to influence the credit decision.

As a result, the board reposed full faith and confidence in MD & CEO Chanda Kochhar. “…the board has come to the conclusion that there is no question of any quid pro quo/nepotism/conflict of interest as is being alleged in various rumours. The Board has full confidence and reposes full faith in the Bank’s MD & CEO Ms Chanda Kochhar. The Board also recommends the entire management team under the leadership of the MD & CEO for their hard work and dedication. We would urge you not to be misled by these rumours which are being spread to malign the Bank and its top management,” a statement from the board of directors said.

Besides chairman MK Sharma and MD & CEO Chanda Kochhar, the ICICI Bank board includes N. S. Kannan, Executive Director; Vishakha Mulye, Executive Director; Vijay Chandok, Executive Director; Anup Bagchi, Executive Director; Chartered accountant Uday Chitale; chartered accountant Dileep Choksi; former IBM India head Neelam Dhawan; former IRMA director Dr Tushaar Shah; former LIC chairman VK Sharma; and former IAS officer Amit Agrawal.

Rajiv Kochhar, the brother-in-law of ICICI Bank managing director and chief executive officer (CEO) Chanda Kochhar, was detained by immigration authorities at Mumbai airport when he was to leave for a Southeast Asian country and handed over to Central Bureau of Investigation (CBI) sleuths, who questioned him in connection with the Videocon loan case.

Kochhar was stopped from leaving the country at the Mumbai international airport by the authorities as the CBI had issued a lookout circular (LoC) against him, officials said. He was handed over to a CBI team which is questioning him in connection with the case, they said.

The CBI has already questioned a few ICICI Bank officials as part of a preliminary enquiry (PE) to find if any quid pro quo was involved in the bank issuing a Rs3,250 crore loan to Videocon Group in 2012. Agency officials said they are also studying relevant documents of the transaction and if they come across any evidence that indicates wrongdoing. Chanda Kochhar, her husband Deepak Kochhar along with others could be summoned for detailed questioning.

They said the statements of nodal officers of ICICI Bank, who were part of processing the loan of about Rs3,250 crore, have been recorded as part of the preliminary enquiry or PE registered six weeks ago. The PE has named Videocon Group promoter Venugopal Dhoot, Deepak Kochhar and unidentified others, they said.

A PE is a precursor before the agency lodges an FIR to probe criminal charges on the basis of evidence collected during the former exercise. The deal recently made news after reports questioned the loan and linked it to a possible quid pro quo that Dhoot allegedly had with NuPower Renewables, a company founded by Deepak Kochchar.

Last week, the ICICI Bank board came out in support of Chanda Kochhar, saying it had full faith and confidence in her and described certain reports against her regarding credit disbursement to Videocon Group as “malicious and unfounded rumours”.

The board had also reviewed the bank’s internal processes for credit approval and found them robust, the private sector lender had said in a statement. With regard to loans to Videocon Group, it said the bank’s current exposure was part of a syndicated consortium arrangement.

“ICICI Bank was not the lead bank for this consortium and the bank only sanctioned its share of facilities aggregating approximately Rs3,250 crore which was less than 10 per cent of the total consortium facility in April 2012,” it added. The bank had clarified that none of the investors of NuPower Renewables were borrowers of ICICI Bank.

In December 2008, Deepak Kochhar and Venugopal Dhoot set up NuPower Renewables Pvt Ltd (NRPL). Dhoot held 50 per cent stake in the company with his family members and associates. Deepak Kochhar and Pacific Capital owned by Deepak Kochhar’s father and Chanda Kochhar’s brother’s wife held the remaining 50 per cent.

* In January 2009, Dhoot resigned as director of NuPower and transferred his 24,999 shares in the company to Kochhar for Rs 2.5 lakh.

* In March 2010, NuPower got a loan of Rs 64 crore (as fully convertible debenture) from a company called Supreme Energy Private Limited which was 99.9 per cent owned by Dhoot.

* Following a sequence of transfer of shares from Dhoot to Kochhar and then from Kochhar and his relatives’ Pacific Capital to Supreme Energy, Supreme Energy became a 94.99 per cent shareholder in NuPower by the end of March 2010. Kochhar held the remaining 4.99 per cent stake in NuPower at the time.

* In November 2010, Dhoot transferred his entire holding in Supreme Energy, to his associate Mahesh Chandra Punglia.

* Beginning September 29, 2012 to April 29, 2013, Punglia transferred his holding to Pinnacle Energy, a trust, where Deepak Kochhar was the managing trustee. The total transaction value of the complete transfer of shares from Punglia to Kochhar’s Pinnacle Energy trust: Rs 9 lakh.

In effect, Supreme Energy gave a loan of Rs 64 crore to NuPower and then got subsumed by Pinnacle Energy within three years.

ICICI Bank did not respond to queries sent by The Indian Express on these financial transactions, share transfers between Dhoot/Videocon companies and companies run by Deepak Kochhar, and on the issue of conflict of interest.

But on the issue of loan granted to Videocon Group, the bank said: “In 2012, a consortium of over 20 banks and FIs where State Bank of India was the facility agent (Lead) sanctioned facilities to the Videocon group (Videocon Industries Ltd. and 12 of its subsidiaries/ associates as co-obligors) for a debt consolidation programme and for the group’s oil and gas capital expenditure programme aggregating approximately Rs. 40,000 crore…ICICI Bank sanctioned its share of facilities aggregating approximately Rs 3250 crore which was less than 10% of the total consortium facility in April 2012.”

It further said “The current outstanding against this loan is Rs 2810 crore and total current exposure to Videocon group is Rs 2849 crore…The Videocon group account has been classified as an NPA during 2017.”

When contacted, Venugopal Dhoot said, “On January 15, 2009, I resigned as a director of NuPower Renewables and Supreme Energy Private Ltd and sold at par the 24,996 shares of NuPower and 9,990 shares of Supreme Energy held by me, thereby relinquishing my right, title and interests in the said shares, giving up control and management of Supreme Energy and completely disassociating myself from both the Companies all on the same day, as I got too busy with my other larger business like oil & gas, telecommunication, etc.”

NuPower stated the same in its response to the email sent by The Indian Express.

However, Registrar of Companies filings of Supreme Energy show that Dhoot owned it until October 2010 and then transferred his share holding to Punglia in November 2010.

Nupower also said that it has no concern or connection with ICICI Bank’s lending to companies owned by Venugopal Dhoot.

On the question of conflict of interest, a spokesperson for NuPower said: “There is no conflict of interest whatsoever and the above transactions have nothing to do with any loans processed by ICICI Bank. Pinnacle Energy trust and Supreme Energy have no business relationship with ICICI Bank.”

As of March 2017, for which latest RoC records are available, Deepak Kochhar held an aggregate of 43.4 per cent in NuPower both as direct holding and through Supreme Energy and Pinnacle Energy.

The remaining holding is with Mauritius-based DH Renewables. As of March 31, 2016, Kochhar along with Supreme Energy and Pinnacle Energy held 96.23 per cent.

While the company came into existence in December 2008, it announced net losses in last six financial years. In the six years from FY’12 to FY’17, the accumulated losses for NuPower amounted to Rs 78 crore. In FY’17 it posted a loss of Rs 14.3 crore.

Detailed responses from ICICI Bank, Venugopal Dhoot below

ICICI Bank

This refers to your email dated March 27, 2017 addressed to Ms. Kochhar and her team. I would like to clarify that the purported allegations of conflict of interest in your mail are completely baseless and unfounded. As a matter of practice, the Bank does not comment on client specific issues. However, given the various insinuations in your email, I give below the answers to you questions.

SECTION A

Question 1. In 2012, ICICI Bank has not sanctioned loans to the five companies mentioned in your mail.The factual details of the loan facilities sanctioned in April 2012 to the Videocon group are given below:

a. In 2012, a consortium of over 20 banks and FIs where State Bank of India was the facility agent (Lead) sanctioned facilities to the Videocon group (Videocon Industries Ltd. and 12 of its subsidiaries/ associates as co-obligors) for a debt consolidation programme and for the group’s oil and gas capital expenditure programme aggregating approximately Rs. 40,000 crore.

b. ICICI Bank’s current exposure to the Videocon group is part of this syndicated consortium arrangement.

c. ICICI Bank sanctioned its share of facilities aggregating approximately Rs. 3250 crore which was less than 10% of the total consortium facility (including a short-term loan of Rs. 650 crore as a sub-limit) in April 2012.

d. The Information Memorandum (IM) and the initial due diligence for the financing programme was prepared by the lead arrangers namely SBI CAPS and IDBI Bank.

e. After the preparation of the IM by the lead arrangers and after the sanction of the facilities by SBI and IDBI Bank, the Credit Committee of ICICI Bank in 2012 sanctioned its share of facilities in the syndicated arrangement to the Videocon group.

f. This committee was chaired by the then Chairman of ICICI Bank and it included many independent and working Directors of the Bank. It is important to note that Ms. Kochhar was not the Chairperson of this committee.

g. The Terms and Conditions offered for these loans are similar to those offered by the other banks in the consortium, ruling out the possibility of any special benefit to the borrower by ICICI Bank.

h. Please note that ICICI Bank’s share of the banking sector’s exposure to the Videocon group was less than 10% while around 90% of the loans were sanctioned by other banks and FIs.

Question 2: The current outstanding against this loan is Rs. 2810 crore.

Question 3: In 2012, no loans were granted to Tuskar Overseas Inc. by ICICI Bank or any of its branches/ subsidiaries.

Question 4: There is currently no loan outstanding to Tuskar Overseas Inc. from ICICI Bank or any of its branches/ subsidiaries.

Question 5. The total current exposure to Videocon group is Rs. 2849 crore.

Question 6. The answer to this is the same as Question no. 5

Question 7. The Videocon group account has been classified as an NPA during 2017.

SECTION B:

Your other questions do not pertain to us and our clients, but given the insinuations made in your mail, I would also like to state that none of the investors of NuPower Renewables are borrowers of ICICI Bank.

SECTION C:

I would also like to inform you that the Bank has a well-structured and standardised credit approval process, which includes a well-established procedure of comprehensive credit appraisal, credit approvals and monitoring. I am mentioning the details below:

a. The Credit Risk Management Group (CRMG), which is independent of the business groups of the Bank, evaluates and assigns a credit rating to the credit proposals. A borrower’s credit rating is a vital input for the credit approval process. Every proposal for a financing facility is prepared by the relevant business unit and reviewed and rated by the CRMG before being submitted for approval to the appropriate authority.

b. The Bank’s credit approval authorization framework is laid down by the Board of Directors

c. The authorisation framework is risk based with lower rated borrowers and/or larger exposures being escalated to higher committees. The larger exposures are approved by the Credit Committee of the Board

d. The majority of Credit Committee members are independent directors of the Bank.

e. The Chairman of the Credit Committee, till as late as June 2015, was always a non-Executive Director.

f. The functioning of the Credit Committee is closely overseen by the Board of the Bank. The proceedings of the Credit Committee are presented to the Board on a periodic basis and the Board has clear supervision and control on the decisions of the Credit Committee.

Based on the above, it can be observed that there are multiple functions to appraise, rate and monitor the credit decisions at the Bank. Accordingly, it can be concluded that there are adequate checks & balances in loan appraisal, rating and approval processes within the bank, both from the control as well as from a governance perspective. Given this architecture, no individual employee, whatever may be his or her position, has the ability to influence the credit decision at the Bank.

All the details as mentioned above clearly demonstrate that there is no conflict of interest as mentioned in your mail.

We do not expect a responsible newspaper like you to lend your platform to rumours to mar the reputation of an organisation and an individual. Hence, we strongly urge you not to write or publish anything in any form of media (print/digital/social media) which projects ICICI Bank and/or its MD & CEO in poor light.

Trust this serves to clarify and dispel any misgivings you may have on the subject. I am willing to speak to you tomorrow for any further clarification.

MK Sharma

Chairman, ICICI Bank Ltd.
NuPower Renewables

At the outset we would like to say that we have no concern or connection with ICICI Bank’s lending to companies owned by Mr. Venugopal Dhoot.

The facts stated in your email are not correct. The correct facts are explained below:

Answer no 1:

Mr. V N Dhoot resigned from the board of directors of NuPower Renewables and Supreme Energy Pvt Ltd on January 15, 2009, and on the same day he sold at par his 24,996 shares of NuPower Renewables and also sold to a third party his 9,990 shares of Supreme Energy at par on account of being busy with other engagements. Hence, he gave up control of Supreme Energy and completely delinked himself from both the companies’ w.e.f. January 15, 2009. Hence Mr. Dhoot has no concern or interest with Supreme Energy beyond January 15, 2009.

Supreme Energy’s investments in fully convertible debentures (FCD) of NuPower Renewables of value Rs. 64 crores were allotted in March 2010.

At all times, Supreme Energy’s holding, on fully converted basis, taking into account the equity shares and other convertible securities held by other shareholders/investors, was never 95% in Nupower Renewables. Upon conversion of the FCD in March 2016 and conversion of convertible instruments held by other shareholders/investors, Supreme Energy’s equity shareholding was just 10.1%.

Other than the said 24,996 shares subscribed at the time of incorporation (which were subsequently sold) neither Mr Dhoot nor Videocon held any shares in NuPower Renewables.

The subscription amount of the fully convertible debentures were used towards acquisition of wind power projects.

Answer no. 2:

Pacific Capital sold 22,500 shares of NuPower Renewables to Supreme Energy in June, 2009 at par (which was at the then fair market value) since at the time of incorporation Deepak Kochhar had subscribed to shares and convertible instruments which were subsequently converted into equity shares in March 2012.

Answer no. 3:

Pinnacle Energy trust purchased the 9,990 shares of Supreme Energy at Rs. 10 per share from the then existing shareholder on 29thSeptember, 2012 being higher than the fair market value of Rs. 8.82 per share, and then it further invested Rs. 8 lacs to subscribe to 80,000 shares of Supreme Energy in April 2013 at fair market value by way of fresh investment.

At no time did the Pinnacle Energy trust along with Supreme Energy ever hold more than 50% of the share capital of NuPower Renewables (on as converted basis).

Answer no. 4:

There is no conflict of interest whatsoever and the above transactions have nothing to do with any loans processed by ICICI Bank. Pinnacle Energy and Supreme Energy have no business relationship with ICICI Bank.
Venugopal Dhoot reaction to queries

1. I was invited as an initial Director of NuPower Renewables formed on 24th December 2008 due to my experience in Solar Energy projects and subscribed to 24,996 shares of NuPower at par.

However, on 15th January 2009, i.e. within 20 days I resigned as a Director of NuPower Renewables and sold at par the 24,996 shares of NuPower, and completely disassociated myself from NuPower Renewables on that day, as I got too busy with my other larger business like oil & gas, telecommunication, etc.

2. Besides the 24,996 shares of NuPower held by me and sold off immediately being of value only Rs 2,49,960/-, neither Videocon nor me held any shares in NuPower. Me and my family members did not own 50% in NuPower Renewables at all ever.

3. The allegation of conflict of interest is substanceless and denied.

Loans are sanctioned by Banks including ICICI Bank by a Committee of Directors before whom a detailed Project Appraisal and Risk Analysis carried out by various departments of the Bank are presented for loan sanction. Hence no individual can indulge in favouritism.

Further, our loan sanctioned by ICICI Bank in 2012 was under a consortium of several Banks led by SBI at the same terms as sanctioned by the consortium Bankers. ICICI Bank took its share of the loan in the consortium.

4. These five companies mentioned in your email, i.e. Trend Electronics Limited, Century Appliances, Kail Limited, Value Industries Limited and Evans Fraser & Company had never ever been disbursed any funds in April 2012 by ICICI Bank and they have no outstanding dues to ICICI Bank or any other banks as on date.

The only funds sanctioned by ICICI Bank in April 2012 was to Videocon Industries Limited, which was a sum of Rs.1500 crore under consortium funding of 20 banks with SBI as the lead and the sanction was on the same terms and conditions of the other consortium banks. With regard to Tuskar Overseas Inc, the loan was disbursed in 2006 and there is no outstanding as on date as it was paid off in 2010. The current loan outstanding from ICICI Bank is only to Videocon Industries Limited, being only Rs.1400 crore, which is very small compared to other banks.

Part 2
Further to my email to you yesterday, I would like to state that on 15th January, 2009, I resigned as a director of NuPower Renewables and Supreme Energy Private Ltd and sold at par the 24,996 shares of NuPower and 9,990 shares of Supreme Energy held by me, thereby relinquishing my right, title and interests in the said shares, giving up control and management of Supreme Energy and completely disassociating myself from both the Companies all on the same day, as I got too busy with my other larger business like oil & gas, telecommunication, etc.

The said 9,990 shares of Supreme Energy duly sold on 15th January, 2009 were handed over to the purchaser along with transfer deed on the same day and the consideration for the same was immediately received by me from the purchaser.

Therefore I have no connect with the business of Supreme Energy nor Nupower Renewables since 15thJanuary, 2009.

As explained above the initial 24,996 shares held by me in NuPower Renewables were sold at Rs. 10 per share. Besides these shares, neither Videocon nor me held any shares in NuPower Renewables.

For all other information sought in your current email, you may kindly contact NuPower Renewables for the same.

With best regards,
V N Dhoot

Inputs with original story published in Indian Express*