Padmaja G Reddy, the managing director of microfinance company Spandana Sphoorty Financial, has resigned from her post. Reddy’s resignation comes after differences with equity investor Kedaara Capital. A dispute between the promoters and investors of the company has led to some more such resignations in the microfinance sector in the recent past.
Spandana Sphoorti Financial is the second largest company in the NBFC sector. Padmaja G Reddy was the founding managing director of the company. He had objected to Kedara Capital’s attempt to sell the country’s second largest NBFC-MFI to Axis Bank at an “extremely low price”.
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The board of Spandana has accepted Reddy’s resignation with immediate effect. The company said in a notice sent to the stock exchange late Tuesday that it will appoint a well-known industry stalwart as its new MD and CEO and form a new management committee.
The incident reminds one of Vikram Akula, the founder of SKS Microfinance, who had to leave the company nearly a decade ago following a similar dispute with investors. SKS Microfinance today known as Bharat Financial Services was acquired by IndusInd Bank in July 2019.
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“The board, led by Kedara Capital, has decided not to extend my contract as managing director,” Reddy told an English daily. He further said, “I had opposed the attempt to sell the company to Axis Bank at a very low price.”
He further added, “While other MFIs have been bought at book value multiples of 4.75x and 3.5x in the past few months, Kedara wanted to sell Spandana at 1.6x, which is a third of the valuations of other companies.” According to an estimate, Spandana has a loan portfolio of around Rs 8,000 crore.
He said the merger proposal between Spandana and Axis Bank had put a valuation of Rs 700 crore, which according to him was significantly “undervalued”. After Reddy’s resignation, it may be easier for Kedara to go ahead with the merger proposal and garner the consent of three-fourths of the shareholders, which is required to approve the merger proposal.
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