Drama at GTB: Three directors resign

Even as potential buyers are conducting a due diligence on Global Trust Bank (GTB) to offload 49 per cent of its equity to strategic investo...

Even as potential buyers are conducting a due diligence on Global Trust Bank (GTB) to offload 49 per cent of its equity to strategic investors, three of the bank’s directors including chairman of the board audit committee Venkappa M. Agadi, have quit. The other two directors who left are J.V. Shetty, former chairman of Canara Bank and S.B. Ghosh, a former senior partner of Pricewaterhouse and a fellow of the Institute of Chartered Accountants in India as well as England & Wales.

The bank is understood to have accepted their resignations at a board meeting held on Tuesday. However, until Wednesday afternoon, no information was provided to stock exchanges on which it was listed. Sources say that the three directors quit on account of serious differences with the management and auditors regarding loan loss provisions.

When contacted, Agadi admitted that he has quit the GTB board but would not go into details. He said that he was resigning in line with the Ganguli Committee recommendations since he was already 70. When pressed about whether there were differences over provisioning of loans, Agadi said he did not want to discuss the issue. He also claimed that he didn’t know about the resignation of the other two directors. Agadi is the former CMD of Parke Davis. When contacted GTB’s managing director Sudhakar Gandhe, said that Agadi has resigned in line with the Ganguly committee recommendations. Asked if he was the first director to have quit at the age of 70, Agadi laughed and agreed, while Gandhe said that one would see similar resignations in the coming months.

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As for the other two directors, he insisted that there were no issues about loan loss provisioning. In one case, he said there was a conflict of interest that was the problem.

Interestingly, media reports about GTB’s restructuring plans, which are understood to have emanated from the company, were silent about the resignations, although one report mentioned the induction of Dayanand Soma, Hyderabad-based businessman on the board.

A team of lawyers and investors are at the GTB offices completing due diligence in connection with restructuring its capital and hiving off its equity to foreign investors. Media reports say that the bank planned to write down part of its existing capital and set it off against its NPAs.

The NPA provisioning is estimated at Rs 350 crore, requiring a fresh capital infusion of Rs 250-300 crore into the bank. Sources however say that the restructuring would see Ramesh Gelli, who holds approximately 21 per cent of the equity, sell off his shareholding to strategic investors. However, Mr Gandhe said he could not say anything about Gelli’s plans or the restructuring at this time.

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Media reports suggest that US-based Newbridge Capital and the Hong Kong-based AIF along with Warburg Pincus are ‘interested’ in buying into GTB; a deal may have been clinched with a US-based investor. The restructuring plans however had no impact whatsoever on the price of GTB since the scrip was moved into the trade-to-trade segment which requires spot transactions. The scrip fell Rs 2.80 to Rs 20.15 on the NSE, with the order book showing only sellers.