Unauthorised Mytrah loan raises governance concerns

The Piramal and APG-backed Indian developer has appointed a law firm to undertake a comprehensive review of a $2.4m loan to its chairman that was used to buy a property.

Mytrah Energy, an Indian renewable energy producer, was involved in an unauthorised loan to its chairman at the time of Piramal Group and APG’s offering of a refinancing package to the company.

“The Independent Members of the Board has been advised that a loan of $2.4 million was made in early September 2017 to the company’s chairman, Ravi Kailas, for the purchase of a property which is not related to the company’s operations,” said Mytrah, in a filing with London Stock Exchange last week.

The AIM-listed company noted that the loan was made “without prior approval of the board” and Kailas has repaid the full amount of the loan, according to a follow-up filing on Monday.

Mytrah’s board has engaged an independent law firm to carry out a comprehensive review of the transaction and will update shareholders upon the completion.

This incident came as Mytrah concluded a $277 million debt refinancing package with Indian conglomerate Piramal and Dutch pension manager APG in mid-September. The fresh capital, which is expected to fund two Mytrah subsidiaries, is replacing existing investments held by domestic fund managers IDFC Alternatives and AION Partners, as well as two international investment banks, Merrill Lynch and Goldman Sachs.

APG and Piramal hadn’t responded to requests for comment by the time of publication.

Cantor Fitzgerald Europe’s research team cut the rating on the renewables developer following the loan to Kailas as it potentially represents a major governance breach. “We think the announced review may improve the situation but also creates risk,” said Adam Forsyth, equity analyst of alternative energy and resource research efficiency.

“This review could be an excuse for a more substantive improvement in governance which could benefit the company. A number of actions had been taken in the past which we felt reduced overall governance but were appropriate for a small company, notably the slimming down of the board,” he said, adding that they saw risk from both the review itself and from external actors including the key regulatory authorities.

Mytrah is one of the country’s largest independent renewables developers with a portfolio of 2GW in operations and under development across nine states. It also claims to have one of the largest wind data banks in India with more than 200 wind mast locations across the country.