On this podcast, we take a look at some of the biggest stories that made the most noise in India Inc.
Rakesh Sharma
Yes Bank rejig
After taking over as CEO, Yes Bank's Ravneet Gill, in a move never before seen in the Indian banking industry, is planning to replace at least 14 top executives, including some of former CEO Rana Kapoor's aides, according to media reports.
A source told Mint, "RBI advised the board and Gill to review the decisions taken by Rana Kapoor both in terms of business and key management-level hires. RBI suggested the board feel free to reverse any appointment decision taken by Kapoor, if it is required to clear the bank of Kapoor’s influence and strengthen the bank’s governance and credit disbursal processes." The shuffle is intended to improve corporate governance, risk management, and credit disbursal policies at the bank.
Among the 14 executives who might be facing the chop are Rajat Monga, group president (who was also a contender for the CEO post); Rajiv Anand, group president and national head of corporate finance; Raj Ahuja, group CFO; Kumar Padmanabhan, COO; and Ashish Aharwal, chief risk officer.
The exodus, should it be enforced, will be in addition to some more high profile exits in recent times, besides Rana Kapoor's own. Pralay Mondal was reported to be quitting as group president of retail banking by the Economic Times. While Yes Bank, at the time, had termed the report speculative, Mondal did indeed quit Yes Bank to join Axis Bank. Last November, R Chandrashekhad also resigned from Yes Bank, after questioning corporate governance practices in his resignation letter.
According to the Mint report, the eight other top executives whose replacements are being planned by Yes Bank include senior officials from the infrastructure finance division, transaction banking and payments business division; government banking department; MNC banking division; corporate banking department; compliance division; human resources department; rural and inclusive banking division; and SME banking department.
A global headhunting firm has been appointed to look for possible replacements for these 14 executives, and the bank hopes to have the rejig completed within 2-3 months, according to the sources that spoke to Mint.
People perceived to have been close to Rana Kapoor are all looking at an imminent exit, thanks to the RBI's insistence on a complete overhaul. Raj Ahuja, who joined Yes Bank last year as CFO, reported to Kapoor; Monga, a contender for CEO, was one of Kapoor's most trusted colleagues in the bank. Rajiv Anand is anyway serving a notice period, and his position has been filled by Lata Pillai from Deutsche Bank. The RBI has questioned Yes Bank's credit quality, implying there has been a failure on the part Ashish Agarwal, the chief risk officer. Operational performance during Kapoor's tenure has also come under a cloud, with the bank lending to companies and projects with subpar or questionable creditworthiness, meaning, the operational side of things, headed as of now by Kumar Padmanabhan, has also come under the RBI's scrutiny. As has the compliance department, headed by Devamalya Dey, which has come under fire from the RBI for poor compliance when it disclosed a nil divergence report, in violation of the confidentiality clause, in February this year.
These issues, and the RBI's desire for a complete overhaul may have led new CEO Ravneet Gill to undertake these unprecedented steps.
A Yes Bank spokesperson replied to an email stating that Mint’s query is entirely incorrect, “totally unfounded and baseless and we deny the same". “As on date, all these officials are working with the bank. They may leave or be replaced by the bank in future. But putting a timeline will be speculative," said the spokesperson on the phone to Mint.
Moneycontrol has not yet independently verified this report.
Neogen's IPO
The new kid on the block, Neogen Chemicals, has been fully subscribed on its second day of subscription.
The public offer has been subscribed 1.52 times, as per data available on the National Stock Exchange. The IPO received bids for 65.95 lakh shares against issue size of 43.29 shares (excluding anchor investors' portion). The reserved portion for qualified institutional buyers was subscribed 94 percent and for non-institutional investors was 83 percent while retail individual investors' category has seen subscription of 2.42 times.
The Rs 132-crore IPO comprises a fresh issue of up to Rs 70 crore and an offer-for-sale of up to 29,00,000 equity shares including an anchor portion of 18,46,715 equity shares. Price range for the offer has been fixed at Rs 212-215 per share.
Neogen Chemicals, manufacturers of bromine-based and lithium-based specialty chemicals - used in application industries such as pharmaceutical, agrochemical, flavour and fragrance and electronic chemicals - raised Rs 39.70 crore from anchor investors on April 23.
Inga Advisors Pvt Ltd and Batlivala & Karani Securities India Pvt Ltd are the book-running lead managers to the offer. The equity shares of the company are proposed to be listed on the BSE and the NSE.
Economic Times reported that "analysts say valuations are mostly pricing in earning prospects, leaving little room for short-term gains. One may subscribe to this IPO with a long-term horizon or give it a miss."
Neogen Chemicals commenced business operations in 1991, at its manufacturing facility in Mahape, Navi Mumbai. It also owns a facility in Karakhadi in Vadodara, Gujarat. Neogen has established a customer base of about 1,363 customers of which 1,237 are domestic customers and 126 customers are international customers that include Austin Chemical Company Inc, USA, CBC Co Ltd (Japan), Divi's Laboratories, Laurus Labs, Solvay Specialties India, Thermax and Voltas.
Promoter group holds 95.79 percent stake in the company and post-IPO their shareholding will come down to 70 percent. Public holding will increase from 4.21 percent to 30 percent.
Tesla's poor quarter
Weak car deliveries in the first quarter have taken a toll on Tesla's bottom line. The company said on Wednesday that it lost $702 million in the first quarter, a prompt U-turn from the profits it had registered in the second half of last year.
Wall Street watchers were already expecting a downturn, but not quite this much. The losses estimated by the Street were in the range of $1.81 per share, but the results are more like $4.10 per share losses. The quarter's revenue of $4.54 billion fell well short of expectations as well.
The New York Times reported that Tesla had $2.2 billion of cash at the end of the first quarter, a 40 percent decline from the figure at the end of last year. The company spent $920 million paying off a bond in March. Tesla’s operations consumed $640 million of cash in the first quarter.
Tesla sold 31% fewer vehicles in the first quarter of 2019 than in the last quarter of 2018. The company has stated that logistical challenges had prevented it from deliveries of the Model 3 sedan to Europe and China. As for fewer sales in the US, a reduction in a federal tax benefit may have weighed on Model 3 sales.
It was not just the car business, but also its solar business that took a sharp turn this quarter, with sales dropping by more than 35% in the quarter.
While the logistical hindrances in overseas deliveries of cars might seem a solvable problem, what has been alarming is the reduced demand for the Model X and the Model S, despite the price cut.
In the analyst call after earnings announcement, one stock analyst raised that very question - why was Tesla cutting prices if demand, as the company claimed, had far exceeded supply. Elon Musk said it was to make the cars "as affordable as possible."
According to The Times, Tesla said that it expected to deliver 90,000 to 100,000 cars in the second quarter, up from 63,000 in the first three months of the year. It said it would lose money again in the second quarter, though less than in the first quarter, and would turn a profit in the third quarter.
Musk has big plans still in the offing for Tesla like producing new vehicles in volume, including a large truck called the Semi. The setting up of new production facilities obviously requires cash, something Musk had been against raising. But it appears there has been a thawing in his thinking. While several analysts had expected that Tesla will have to issue new shares to raise money, Musk had insisted against it. But now, "there is merit to the idea of raising capital at this point," he said, tail firmly between his legs, one imagines.
