The Reserve Bank of India (RBI) deputy governor Shyamala Gopinath has put a question mark on three investment proposals of the State Bank of India (SBI) relating to its exposure in private equity companies, two of which are aimed at floating real estate funds.
Sources said Ms Gopinath, who is the RBI nominee on the board of the country’s largest bank, had expressed her reservations about the proposed investments. The entities, which SBI has identified for investment are Sage Capital, promoted by Manish Kanchan, Unitech’s Unitech Realty Investors, and South Asian Real Estate (SARE), promoted by Anuj Gupta, an NRI.
Sources said Unitech and SARE proposals were approved internally by the SBI investment committee. However, when the bank circulated the proposal papers among board members as an agenda for a subsequent board meeting, Ms Gopinath voiced her concerns.
As a result, these two proposal were not formally placed before the board. It may be mentioned that RBI has always been averse to banks taking exposure in real estate and related entities. When contacted by ET, Unitech officials declined to comment on the matter.
Meanwhile, in February, SBI had announced its plans to acquire 19.75% stake in Sage Capital. Sources said when the proposal was cleared by the SBI board, Ms Gopinath was not present in the meeting.
However, soon after she got to know about it, she wrote a letter to the bank, stating that SBI should refrain from such investments due to possible reputation risk. Sources said SBI had even put a condition in the proposal that the private equity company will not use the ‘SBI’ brand name for raising funds.
Responding to queries from ET, deputy managing director of SBI Deepak Chawla said, “The proposal has been cleared by the board and while all necessary RBI stipulation like quantum of investment and networth requirements are satisfied, the formal approval from RBI is awaited.”
Regarding the use of the SBI brand name, Mr Chawla said, “Our proposed investment is only Rs 1.975 crore. We propose to be an investor in this fund management company for strategic reasons and we shall have a seat on the board. In investments, with minority or small stake, where we do not have management participation, we do not allow the use of SBI brand name. The same rule has been followed in this case.”
On possible reputation risk, Mr Chawla said, “We have collected market reports on the promoter before considering the investment and found that the promoter Mr Kanchan had adequate corporate finance and institutional equity experience. He has received positive response from a number of institutional investors for investing in the proposed funds and exhibited his ability to enlist experienced names like Gery Wendt, former CEO of GE Capital, as advisors. Nothing adverse is in our knowledge regarding the company and its promoters.”
When contacted, Mr Kanchan said, “We are given to believe that SBI has been in touch with the regulator, and to the best of my knowledge and belief, no queries have ever been sent to the bank about the company or its promoter by RBI. My understanding is that we should receive the approval in due course.”
Mr Kanchan also said that Sage Capital Funds Management is wholly-owned him and he is the sole promoter. “There is absolutely no truth that the company or I having been subject to any action (or even an intimation) by any regulator ever since I started my professional career almost 20 years ago.”
The question, however, remains as to why the RBI deputy governor had objected to the proposed investments. The central bank did not respond to the query from ET.
Source: Economic Times