It’s been a tough week for ICICI Bank. Allegations have emerged against Chanda Kochhar, the MD and CEO of the bank, of having personal interest and making gains in loans worth Rs 3,250 crore sanctioned to Videocon Industries.
The Central Bureau of Investigation (CBI) has registered a preliminary inquiry against Chanda Kochhar’s husband, Deepak Kochhar, and Venugopal Dhoot, chairman of the Videocon group, to investigate the loan given to the company.
The CBI is reportedly looking at relevant documents of the transactions for any evidence of wrongdoing.
But what is the connection between the Kochhars and Dhoots? What did Chanda Kochhar allegedly do? Here are five things to know about the ongoing controversy.
What is the allegation?
An ICICI Bank shareholder, Arvind Gupta, wrote to the Prime Minister, Finance Minister and all investigating agencies accusing the Kochhars of wrongful gains from loans sanctioned to Videocon in 2012.
ICICI Bank was part of a Rs 40,000 crore loan extended to Videocon by a consortium of 20 banks.
Gupta’s letter alleged that Deepak benefitted from this as his firm NuPower Renewables was set up as a 50-50 joint venture between the Kochhars and Dhoots, who are family members of the Videocon Group.
Chanda Kochhar is accused of having favoured the sanctioning of the loan to the company to benefit her husband. After the letter by Arvind Gupta came to light, Indian Express too alleged a connection between Videocon and the Kochhars.
The Kochhar-Dhoot connection
Deepak Kochhar along with Venugopal Dhoot, Chairman of the Videocon Group, set up NuPower Renewables Pvt Ltd (NRPL) in December 2008. Deepak Kochhar, Chanda Kochhar’s brother’s wife, and Deepak’s father’s firm Pacific Capital owned 50% of the company. The remaining 50% was held by Venugopal Dhoot.
Soon after, in January 2009, Dhoot resigned as the director of this company and transferred his shares (24,999 shares) in NuPower to Deepak for Rs 2.5 lakh.
The letter by the whistleblower alleges that after Chanda Kochhar became the CEO and MD of ICICI Bank in May 2009, the identity and ownership of NuPower was masked by transferring the shareholding to a trust called Pinnacle Energy, where Deepak was the Managing Trustee.
NuPower then got a loan of Rs 64 crore in March 2010 from a company called Supreme Energy.
Supreme Energy is 99.9% owned by Dhoot. Around the same time, the Kochhar relatives transferred their shares to Supreme Energy. As a result, Supreme Energy owned 94.99% in NuPower by the end of March 2010 and the remaining 4.99% stake was held by Deepak.
Widening the web of transactions, Dhoot transferred his entire holding in Supreme Energy to his associate Mahesh Chandra Punglia in November 2010.
Following this, between September 29, 2012 to April 29, 2013, Punglia transferred his holding to Pinnacle Energy. Remember, Deepak Kochhar was the managing trustee of Pinnacle.
According to the Indian Express investigation, the total transaction value of the complete transfer of shares from Punglia to Kochhar’s Pinnacle Energy trust was Rs 9 lakh.
According to the whistleblower’s letter, ICICI Bank extended loans to the tune of Rs 3,250 to various private companies belonging to Videocon Industries. He further alleges that ICICI Bank also extended offshore funding amounting to Rs 660 crore to a Videocon Group company based in the Cayman Islands.
He alleges that Chanda Kochhar abused her position as the CEO and MD and facilitated the ‘unscrupulous domestic offshore funding’ to make private gains, which resulted in wrongful losses to ICICI Bank.
He also alleged that Videocon transferred nearly Rs 325 crore to Deepak’s company through a Mauritius company.
The Videocon group account was declared an NPA by the bank in 2017.
ICICI Bank’s stance
The Bank’s board gave Chanda Kochhar a clean chit. To begin with, Chanda Kochhar was not a chairperson of the committee that approved the loans. After reviewing the internal processes and details of exposure to Videocon, the ICICI Bank board said it found no wrong-doing.
In a statement the Board said that there was no quid pro quo, nepotism or conflict of interest in the loans extended and that it has full confidence and reposes full faith in Chanda Kochhar.
In the loans extended to the bank in 2012, ICICI says that it was only a part of the 20-bank consortium and didn’t even lead it.
“ICICI Bank sanctioned its share of facilities aggregating approximately Rs 3,250 crore which was less than 10% of the total consortium facility in April 2012,” it added.
Venugopal Dhoot’s side of the story
“Personal ties between two people do not always result in criminal acts,” Venugopal Dhoot reportedly said, terming all the allegations baseless. In an interview with a Marathi channel ABP Majha, he said that he had invested Rs 2.5 lakh, but pulled out when Videocon discovered oil reserves, which was not aligned with the business of NuPower, and returned his 50% stake to Deepak Kochhar.
He claims to have no contact with Deepak or Chanda Kochhar after he returned his stake.
He also denied investing Rs 64 crore in NuPower, claiming that Videocon does not have any entity called Supreme Energy.
Dhoot also reportedly told PTI that ICICI Bank sanctioned loans to Videocon based on the merit of its projects in the oil and gas sector.
Dhoot claims to know Deepak through his friend and IAS officer, former Maharashtra chief secretary Sharad Upasani.
How has the issue affected ICICI’s shares?
After news of the CBI inquiry into the loans extended to Videocon came out, shares of ICICI Bank tanked by 7%, wiping off Rs 11,353 crore from its market capitalisation.
On BSE, the stock fell 7% to Rs 258.90 while it slumped 7% to Rs 258.80 on NSE. This has been ICICI’s steepest fall since August 24, 2015.
At the end of the day, ICICI Bank’s stock on BSE closed 5.93% down at Rs 261.90 and 5.73% down at Rs 262.40 on NSE.
Videocon’s shares too fell 4.97% to Rs 12.42.
For ICICI, this isn’t the only issue to have hit it recently. RBI, on March 29, imposed a penalty of Rs 58.9 crore on the bank for failing to adhere to the guidelines of held-to-maturity (HTM) category in its bonds portfolio. The penalty is the highest ever imposed on a bank for a single incident.
However, Mint reports that these issues haven’t deterred analysts. Quoting Bloomberg Data, the report states that 50 brokerages have buy ratings on the bank, while 1 has sell and 3 have hold ratings.
Analysts reportedly believe that these events will not have an implication of the bank’s performance.
A few analysts, however, believe that Chanda Kocchar should step down to restore confidence in the bank and if that happens, it could have a negative implication of the performance of the bank.