Ac­tivism

The Economic Times - - Special Feature -

Com­pany: In­vestors: In­dia Eq­uity Part­ners, Bar­ings Pri­vate Eq­uity Part­ners In some in­vestee com­pa­nies, fi­nan­cial in­vestors are play­ing more ac­tivist roles. For in­stance, last year, PE in­vestors in gold-loan firm Manap­pu­ram Fi­nance stepped in to stop the Ker­ala-based lender from us­ing its branches to ac­cept money for chit funds con­trolled by its pro­moter, VP Nan­daku­mar.

Pro­mot­ers con­trol 31.55% of this non-bank­ing fi­nance com­pany (NBFC), which takes gold as col­lat­eral to lend money, and around 25% is owned by a clutch of PE in­vestors. In 2012, the bank­ing reg­u­la­tor, the Re­serve Bank of In­dia, had cau­tioned Manap­pu­ram against ac­cept­ing de­posits from the pub­lic since it is clas­si­fied as a non-de­posit tak­ing NBFC. PE firms, led by In­dia Eq­uity Part­ners and Bar­ings Pri­vate Eq­uity Part­ners, as­signed KPMG to do an au­dit. Over a pe­riod of a month, around 300 KPMG of­fi­cials car­ried out a foren­sic au­dit of Manap­pu­ram’s 3,125 branches. “There were cor­po­rate gov­er­nance is­sues and we had to clean up the en­tire op­er­a­tions to en­sure cross-sell­ing of prod­ucts and rout­ing of money does not hap­pen in the com­pany,” says a per­son with one of the PE funds, on the con­di­tion of anonymity. The PE firms also brought pres­sure on Nan­daku­mar to step down as chair­man and­brought­in­formerRBIdeputy­gov­er­nor,Jagdish Capoor, in his place.

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