YES Bank crisis: ED widens probe, searches homes of Rana Kapoor's daughters

Widening its investigation against YES Bank co-founder Rana Kapoor, the Enforcement Directorate (ED) on Saturday questioned him for several hours at its Ballard Pier office in Mumbai, even as the agency conducted searches at residences of his three daughters in Delhi and Mumbai, said officials in the know. Kapoor’s wife and daughters were also quizzed for hours, they said.

The questioning of the former YES Bank CEO was going on at the time of going to press.

According to the officials, Kapoor’s wife, Bindu, and his daughters — Rakhee Kapoor Tandon, Roshni Kapoor and Radha Kapoor — own “several companies”, and allegedly received kickbacks from various corporate entities in exchange for the disbursal of loans by YES Bank. These kickbacks were through complex transactions involving the promoters of Dewan Housing Finance (DHFL) and some more firms, the officials said.

Initial investigation suggests that the loan amount of Rs 600 crore sanctioned by DHFL to Doit Urban Ventures, a company controlled by the family of Rana Kapoor, was actually the kickback for not repaying the loan to YES Bank.

ALSO READ: SBI says YES Bank survival crucial, can invest up to Rs 10,000 cr in it

The private lender’s debt exposure was to the tune of Rs 3,700 crore in DHFL debenture between April 2018 and June 2018, and also in July 2018. The ED is also examining the loan documents of YES Bank and the terms on which it sanctioned Rs 750 crore to Dheeraj Wadhawan’s RKW Developers for a project near Mumbai’s Bandra Reclamation. The agency came across this transaction during its probe into the DHFL promoters’ role in financing funds to gangster Iqbal Memon (alias Iqbal Mirchi), in a money-laundering case registered against the housing finance firm and many others.

ALSO READ: YES Bank crisis: PhonePe comes to a halt, but staff keeps it up and running

Sources said the agency might also register a separate case against Rana Kapoor, depending on the outcome of the search operation. However, for a separate case, a police complaint has to be registered for predicate offence to probe the matter under the Prevention of Money Laundering Act (PMLA).

Rana Kapoor to face Mumbai court after arrest in money laundering case

YES Bank co-founder Rana Kapoor was arrested by the Enforcement Directorate (ED) early Sunday morning in connection with a money-laundering probe against him and others.

Kapoor’s arrest followed several hours of his questioning at ED’s Ballard Pier office in Mumbai, even as the agency conducted searches at residences of his three daughters in Delhi and Mumbai, an official confirmed. Kapoor’s wife and daughters were also quizzed for hours, they said.

News agency PTI reported investigators will produce Kapoor, 62, before a court in Mumbai later on Sunday and seek his custody.

According to the officials, Kapoor’s wife Bindu, and his daughters – Rakhee Kapoor Tandon, Roshni Kapoor and Radha Kapoor – own “several companies”. They allegedly received kickbacks from various corporate entities in exchange for disbursal of loans from YES Bank.

ALSO READ: YES Bank crisis: ED widens probe, searches homes of Rana Kapoor's daughters

These kickbacks were paid through complex transactions involving the promoters of Dewan Housing Finance (DHFL) and some other firms, the officials said.

Initial investigations suggest that the loan amount of Rs 600 crore sanctioned by DHFL to Doit Urban Ventures, a company controlled by the family of Rana Kapoor, was actually a kickback for not repaying the loan to YES Bank.

The private lender’s debt exposure to DHFL debenture was to the tune of Rs 3,700 crore between April 2018 and June 2018, and also in July 2018.

ALSO READ: SBI says YES Bank survival crucial, can invest up to Rs 10,000 cr in it

The ED is also examining the loan documents of YES Bank and the terms on which it sanctioned Rs 750 crore to Dheeraj Wadhawan’s RKW Developers for a project near Mumbai’s Bandra Reclamation.

The agency came across this transaction during its probe into the DHFL promoters’ role in financing funds to gangster Iqbal Memon (alias Iqbal Mirchi), in a money-laundering case registered against the housing finance firm and many others.

Sources said the agency might also register a separate case against Rana Kapoor, depending on the outcome of the search operation. However, for a separate case, a police complaint has to be registered for predicate offence to probe the matter under the Prevention of Money Laundering Act (PMLA).

Rana Kapoor's family stake in YES Bank slumps to 1.6%; stock falls 23%

Rana Kapoor and his family’s stake in Yes Bank shrunk to 1.6 per cent as promoter shares were invoked and sold by Milestone Trusteeship, which, people in the know say, was on behalf of Reliance Nippon Life Asset Management (RNam).

Further, the people said that shares sold belonged to Kapoor himself, as the quantity of shares offloaded was the same as those held by Kapoor. Queries sent to Kapoor and RNam weren’t answered at the time of going to press.

According to the bulk deal data on the NSE, the debenture trustee sold 100 million shares at a weighted average price of Rs 35.29, translating to Rs 352.9 crore of shares. According to analysts, the share sale may have added to selling pressure in Yes Bank on Tuesday.

The stock closed 23 per cent lower at Rs 32 on BSE. Kapoor and his family have been taking steps to reduce debt on promoter entities, by selling these entities’ holdings in bank to prepay debenture holders.

ChartOn September 26, Yes Capital (YCPL) — one of the promoter entities — sold 1.8 per cent stake in the bank to prepay the entire outstanding non-convertible debentures of YCPL. The sale amounted to Rs 241 crore of shares. The payments were made to Franklin Templeton AMC, for NCDs maturing in October 2020.

On September 19, Morgan Credits sold Rs 337 crore of YES Bank shares, to prepay a certain part of its outstanding dues to RNam. On September 17, CARE Ratings downgraded Morgan Credit’s NCDs from “A-” to “BBB-”. The revised rating accounted for the moderation in equity cover due to the fall in the price of underlying shares of YES Bank.

According to the rating note, these NCDs are Zero Coupon Bonds set for maturity on April 19, 2021. However, the sharp correction in the YES Bank stock hit the equity cover on these exposures.

On July 18 and July 22, MCPL had pledged 70.25 million shares in favour of Milestone Trusteeship (debenture trustee), which represented its entire stake in YES Bank. On July 18, Rana Kapoor had also pledged his entire stake of 100 million shares.

Rana Kapoor's family sells another 1.8% in YES Bank; stock falls 4.9%

YES Capital, one of the promoter entities of YES Bank, on Thursday sold 1.8 per cent stake in the private lender. The share sale helped the promoter group entity, owned by Rana Kapoor’s family, raise around Rs 240 crore. YES Capital sold 46.5 million shares at Rs 51.94 apiece.

YES Capital said the proceeds would go to Franklin Templeton Asset Management, with whom its shareholding of YES Bank was pledged. “The proceeds will be utilised to prepay entire balance outstanding non-convertible debentures (NCDs) of Yes Capital subscribed by various schemes of Franklin Templeton,” said the firm in a release.

Last week, another promoter entity Morgan Credits had sold 2.3 per cent stake in YES Bank for Rs 337 crore to prepay a certain part of its outstanding dues to Reliance Nippon Life AMC (RNam).

A year ago, YES Capital had placed zero-coupon NCDs amounting to Rs 630 crore with Franklin Templeton. Since then, shares of YES Bank have nearly 80 per cent. The sharp fall in the share price has put pressure on YES Bank promoters to furnish higher collateral to avoid invocation of pledged shares by promoters.

The promoter group has achieved “full and final prepayment to Franklin Templeton of entire outstanding NCDs well ahead of the scheduled maturity date of October 2020,”said YES Capital in a release.

Following the sale of shares by YES Capital, Rana Kapoor and his promoter entities shareholding in the private lender fell to 5.5 per cent. Of the 5.5 per cent, Rana Kapoor owns 3.92 per cent, Morgan Credits has 0.46 per cent, and YES Capital holds 1.15 per cent.

YES Capital also said with the share sales, the promoter shareholding in YES Bank has dropped below 15 per cent, making it fully compliant with the Reserve Bank of India’s shareholding cap.

Shares of YES Bank closed 4.93 per cent down at Rs 51.05 on the BSE on Thursday.

YES Bank claws back Rs 1.44-crore performance bonus of ex-MD Rana Kapoor

YES Bank retracted the performance bonus of Rs 1.44 crore of former Managing Director and Chief Executive Officer Rana Kapoor, whose term was cut short by the Reserve Bank of India (RBI) in October last year.

“The board of directors of the bank had considered and approved clawback of 100 per cent of the performance bonus paid to Mr. Rana Kapoor for FY 2014-15 (FY15) and FY16, net of taxes. The amount of bonus subject to clawback was Rs 6.2 million for FY15 and Rs 8.25 million for FY16,” said the bank in its annual report on Thursday.

YES Bank added that it has not paid any bonus to Kapoor for FY17 and FY18. Business Standard had earlier reported that the RBI has kept private banks waiting on bonus payment to top executives.

Kapoor drew a salary of Rs 6.48 crore for the ten months he served as MD & CEO, before his tenure ended in January. The bank’s current MD and CEO Ravneet Gill, who took over in March, was paid Rs 5.93 million for FY19.

The lender said it has executed a service contract with Gill, which includes notice period of three months, subject to RBI approval. He has also been granted 5 million stock options on March 1, 2019, at Fair Market Value (FMV). He may exercise the options granted according to the vesting schedule under the bank’s new MD & CEO Stock Option Plan 2019 — which is 20 per cent, 30 per cent, and 50 per cent each year — from the end of first year of the grant date, said the bank.

Gill did not hold any equity shares in the bank at the end of FY19.

The RBI on Tuesday appointed former RBI deputy governor R Gandhi as an additional director on the YES Bank board for two years, with effect from May 14. This appointment, along with an RBI statement on the regulatory breaches in the bank’s functioning, points towards strained relations between the bank and the regulator. Gill has been vocal about improving the bank’s image with the regulator and ensuring stricter compliance.