Mumbai: Yes Bank Ltd’s decision to request the regulator to extend managing director Rana Kapoor’s tenure is not in the best interests of the lender, Madhu Kapur, widow of co-founder Ashok Kapur and the bank’s second largest shareholder, wrote to the board.
In the 28 September letter to the Yes Bank board, Kapur suggested that the board expedite the process of finding a successor to Kapoor so that the bank does not suffer any long-term setback.
“The decisions that the board appears to have taken are not, in my view, in the best interests of the bank as a public trust financial institution," Kapur said. Mint has reviewed the contents of the letter.
On 25 September, the board of Yes Bank had said it would ask the Reserve Bank of India (RBI) to extend managing director and chief executive Rana Kapoor’s tenure by eight months. The board decided it would first seek an extension for Kapoor till 30 April 2019 for finalization of financial statements for the year to 31 March, and thereafter a further extension till 30 September for completing the annual general meeting process.
The bank’s board decided on the course of action after RBI agreed to extend Kapoor’s tenure till 31 January 2019 in response to the bank’s request for a three-year extension till 31 August 2021. Yes Bank shares have fallen 46% in September because of the uncertainty related to Kapoor’s reappointment.
An email sent to Yes Bank did not elicit any response till press time.
Madhu Kapur wrote that Yes Bank should respect the views of RBI as the banking regulator and take appropriate steps at the earliest to identify a person as Rana Kapoor’s successor, “who is credible, of special caliber, with unimpeachable integrity", under whose leadership the bank will reach greater heights.
The board at its 25 September meeting decided to set up a search committee to identify a successor to Kapoor. The committee will include three existing nomination and remuneration committee board members, along with two external experts. The board also decided to promote Rajat Monga and Pralay Mondal as executive directors, subject to approval from RBI.
Citing a 4 June 2015 Bombay high court ruling, Kapur said in her letter that even the appointment of Monga and Mondal as whole-time directors had been struck down earlier by the court. She added that these earlier appointments were done without consultation with the co-founders.
Kapur has also requested the board to not take any action contrary to the RBI directive and the judgement of the Bombay high court, so that the “challenging situation presently faced by the bank is redressed without suffering any longtime setback to the bank and its stakeholders".
She further wrote that as one of the largest shareholders, the co-founders wish to act constructively in the best interest of the bank and are willing to take steps to protect and further the interest of the bank and all its stakeholders.
On 28 September, Rana Kapoor tweeted that his shares in the bank are akin to diamonds and vowed not to sell them to cut his or his family’s promoter holding in the bank. This was preceded by a report in The Economic Times on the same day that Madhu Kapur had sold 0.04% of her stake on 21 September.
At the end of June, Kapoor held a 4.34% stake and Kapur 7.62%. Other promoters include Yes Capital (India) Pvt. Ltd (3.28%), Morgan Credits Pvt. Ltd (3.05%) and Mags Finvest Pvt. Ltd. (1.7%).
“Considering our vested rights as co-promoters and Indian partners enshrined in the bank’s articles of association, you will appreciate that a constructive and consultative positive approach including in the appointment of whole-time directors, will go a long way in providing comfort to all stakeholders amidst the escalating uncertainty," said Kapur, adding that identifying a good successor to Kapoor is the only priority now.
“We suggest that a specialized agency/agencies of repute be identified and appointed to expedite the process of identifying a suitable successor," added Kapur.
The conflict between Yes Bank’s promoters began in 2009, a year after co-founder Ashok Kapur was killed in the 2008 terrorist attack in Mumbai. The board had declined to appoint Shagun Gogia, daughter of Ashok Kapur. In 2013, Madhu Kapur and her daughter Shagun Gogia approached the Bombay high court seeking greater say in appointing directors and wanted the court to uphold their right to jointly nominate directors.
In June 2015, a single-judge bench of the Bombay high court ruled that both promoters must follow the articles of association. Both Kapur and the bank have challenged the ruling before a division bench.