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In Chanda Kochhar case, ED probe points to conflict of interest

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An Enforcement Directorate (ED) investigation has revealed that former ICICI Bank managing director and CEO, Chanda Kochhar, already held shares in a private company, Credit Finance Limited (CFL), along with her family members and the Videocon Group when she became the executive director of the bank in April 2001 — a significant conflict of interest. It isn’t clear whether this was disclosed to ICICI Bank when Kochhar was named on the board or, indeed, to the Reserve Bank of India when she became CEO.

HT has reviewed a copy of an internal ED report, which states that CFL was held jointly by Chanda Kochhar and family (60% of shares) and Videocon (24.7% shares) since 2000-01. “She became executive director (of ICICI) in April 2001 and also held share of CFL along with other shareholders of the Kochhar group. Her husband Deepak Kochhar was the managing director of CFL till 2009,” the report said.

It is this company — earlier named Credential Finance Limited (incorporated in 1992), which was later merged into Bloomfield Builders and Construction Ltd in 1996 and renamed as Credit Finance Limited (CFL) — which bought Flat number 45, CCI Chambers in 1996 and later mortgaged it to Videocon International Limited. The Kochhars lived in this flat since 1997. In fact, ED adds in its report that when CFL defaulted a loan from SBI Home Finance, it was repaid by Videocon.

ED and the Central Bureau of Investigation (CBI) started looking into a possible quid pro quo between Chanda Kochhar and the Videocon Group based on a whistleblower’s complaint that ICICI Bank loaned money to Videocon in return for Videocon Group chairman, Venugopal Dhoot, investing in Deepak Kochhar’s company. The bank initially cleared Chanda Kochhar of any wrongdoing based on an internal report, but as the investigation deepened, had to ask her to step down.

The ED report terms transactions related to this flat and parties involved in it as “unclean” and “in collusion”.

“The transactions relating to the sale and purchase of this apartment to the individuals and CFL and subsequent settlement among the conspirators i.e. CFL and QTAPL (Quality Techno Advisors Pvt Ltd, a Videocon company which had acquired the apartment, which was 100% acquired by a trust of Chanda Kochhar) are subject matter of thorough probe because parties of both sides in holding the title of apartment are unclean and in collusion also”, the ED report added.

The report further claimed that during her term as the MD-CEO of ICICI Bank from 2009 till 2018, Chanda Kochhar “is alleged to have not disclosed the directorship details of her husband to ICICI Bank), as per the norms under Banking rules”.

Her lawyer, Vijay Aggarwal, declined to comment. ICICI Bank did not respond to an e-mail from HT.

According to Section 184 of the Companies Act, every director of a company (both private and public) should disclose their interest or concern in a third party. Kochhar not disclosing the shares held by her in CFL is also against Reserve Bank of India (RBI) guidelines, two banking experts said.

An ED officer who spoke on condition of anonymity said: “Chanda Kochhar didn’t inform the ICICI bank about her shareholding, her husband’s business interests and their connection with Videocon while she continued to be on several sanctioning committees of the bank which approved loans for the Videocon group companies.”

As first reported by HT, ED has expanded its probe against Kochhars and Videocon group in total 24 loans worth Rs 7,862 crore.

The ED has listed 24 companies which were or are run by the Kochhar group.

Chanda and Deepak Kochhar were questioned for the fifth day on Friday.

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Donald Trump does not want to do business with China’s Huawei

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U.S. President Donald Trump on Sunday said he did not want the United States to do business with China’s Huawei even as the administration weighs whether to extend a grace period for the company.

Reuters and other media outlets reported on Friday that the U.S. Commerce Department is expected to extend a reprieve given to Huawei Technologies Co Ltd that permits the Chinese firm to buy supplies from U.S. companies so that it can service existing customers.

The “temporary general license” will be extended for Huawei for 90 days, Reuters reported, citing two sources familiar with the situation.

On Sunday, Trump told reporters before boarding Air Force One in New Jersey that he did not want to do business with Huawei for national security reasons.

“At this moment it looks much more like we’re not going to do business,” Trump said. “I don’t want to do business at all because it is a national security threat and I really believe that the media has covered it a little bit differently than that.”

He said there were small parts of Huawei’s business that could be exempted from a broader ban, but that it would be “very complicated.” He did not say whether his administration would extend the “temporary general license.”

Speaking earlier on Sunday, National Economic Council director Larry Kudlow said the Commerce department would extend the Huawei licensing process for three months as a gesture of “good faith” amid broader trade negotiations with China.

“We’re giving a break to our own companies for three months,” Kudlow said on NBC’s “Meet the Press”. 

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Asia’s richest man Mukesh Ambani grooms the heirs to his $50 billion fortune

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Among Mumbai’s glitziest society events over the past year were two weddings in the family of Mukesh Ambani, the Indian tycoon who in 2018 became Asia’s richest person.

In December, his 27-year-old daughter Isha got married in a Bollywood-style extravaganza attended by global power brokers and titans of finance. Beyonce sang at the festivities, Hillary Clinton flew in and KKR & Co.’s Henry Kravis made an appearance. In March, her twin brother Akash wed in a ceremony attended by the likes of Google Chief Executive Officer Sundar Pichai.

The lavish events put Ambani’s eldest children in a very public spotlight at a time when they are playing more visible roles at his Reliance Industries Ltd.’s retail and telecommunications businesses.

Ambani, 62, has big ambitions in new areas like e-commerce and is enlisting his children to help drive the modernization of his empire. The rise of the twins offers early signs of the efforts the titan is making to groom his heirs. The billionaire on Aug. 12 announced that the world’s biggest crude producer, Saudi Aramco, will buy a 20% stake in the oil and chemicals business of Reliance Industries, allowing the Indian conglomerate to reduce the debt that increased during its expansion spree of recent years.

Over the coming decades, billions of dollars in wealth will be handed over to yet another generation in family-controlled businesses across Asia. Such dynastic transfers can come with pitfalls, as Mukesh and his younger brother, Anil, well know. More than a decade ago, the brothers were embroiled in a feud over the family business after their father, Dhirubhai, died without leaving a will.The twins are having a very different beginning to their careers from the patriarch, Dhirubhai. The late industrialist—who started out as a gas-station attendant in Yemen—built up Reliance Industries into a petrochemicals giant at a time when India’s economy was heavily controlled by the government.

“They have to show their mettle in entrepreneurship and strategy like their father and grandfather,” said Kavil Ramachandran, a professor and executive director at the Thomas Schmidheiny Centre for Family Enterprise at the Hyderabad-based Indian School of Business.

Representatives for the senior Ambani brothers declined to comment, and Isha and Akash were not available for interviews.

Appointed in 2014 to the boards of Reliance Jio Infocomm Ltd., the mobile carrier unit, and Reliance Retail Ventures Ltd., the twins have raised their profiles in subsequent years, addressing investors at annual shareholder meetings and introducing new products. The duo also helped bring an open-office culture for top executives at the group’s corporate park in Mumbai’s outskirts.

At Reliance Industries’ annual meeting on Aug. 12, they demonstrated a range of applications such as virtual reality and conference calls that come with a new high-speed data network the company is rolling out.

Isha, a Yale University graduate and a former McKinsey & Co. consultant, kicked off Reliance’s e-commerce foray into fashion retail in 2016 by starting online shopping portal Ajio. Her husband is Anand Piramal, the son of Indian billionaire Ajay Piramal, whose interests range from pharmaceuticals to real estate.

Akash, a Brown University alumnus, has studied economics. He married his childhood sweetheart, Shloka Mehta, the daughter of a Mumbai-based diamond trader and jeweler. The twins have a younger brother, Anant, 24.

“Going forward, you will see Anant also taking some key responsibilities,” said Arun Kejriwal, founder at KRIS, an investment advisory firm.

The younger generation is getting involved at a time when Reliance is pivoting toward consumer offerings, which Ambani has said will contribute almost as much as the group’s core energy businesses by the end of 2028. Global retailers such as Amazon.com Inc. and Walmart Inc. are also expanding in India, bringing in new competition that the Ambani family must contend with in the coming years.

Ambani’s group is attempting to use its mobile carrier and retail units to tap India’s online shopping market, which by Morgan Stanley’s estimates will surge sixfold to $200 billion in about a decade. At the same time, Reliance’s Jio, since its debut in 2016, has shaken up India’s telecommunications industry with free calls and cheap data, forcing a consolidation that whittled down carriers to three from about a dozen four years ago.

The senior Ambani has credited his children with helping to nudge him into the internet business.

In 2011, while in India on a break from college at Yale, Isha complained about the poor quality of the internet at the family home, which made it more difficult for her to submit her coursework, Ambani has said. Meanwhile, Akash kept reminding his father that digital communications, rather than just phones, were now driving the world.

After Dhirubhai’s death in 2002, the brothers’ fight for control went on until their mother intervened in 2005 and brokered a settlement under which they carved up the vast empire. The older one kept the oil refining and petrochemicals businesses, while the younger one got the newer ventures in finance, infrastructure, power and telecom.

While the paths of the brothers diverged, so have their fortunes. Mukesh’s worth is about $50 billion, according to the Bloomberg Billionaires Index. He lives a lifestyle to match, with a 27-story, 400,000-square-foot home in Mumbai named Antilia, after a mythical island, that boasts nine elevators, a spa, a 50-seat theater and a helipad.

The value of Anil’s holdings in companies, calculated net of pledged shares, is about $75 million, according to data compiled by Bloomberg. That compares with a net worth of at least $31 billion in 2008.  Stock prices of Anil’s various businesses have slumped as the units struggle to pay about $13 billion of debt—not counting his phone venture, which this year slipped into bankruptcy.

Bloomberg News is currently defending litigation brought by Anil Ambani and his Reliance Communications in connection with previous Bloomberg reporting.

Earlier this year, Mukesh stepped in to pay about $78 million of vendor dues owed by one of Anil’s businesses, helping his younger brother avoid a stint in jail.

Meanwhile, Mukesh isn’t the only one preparing his offspring for the future.Now working to reduce his debt load by selling the equivalent of more than $3 billion in assets, Anil also has an eye to the future. His son, Jai Anmol, 27, Anil’s son, was appointed executive director at Reliance Capital Ltd. in 2016.

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After $140 billion wipeout, China’s two largest companies bid for comeback

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China’s two largest companies have lost a combined $140 billion in market value since the escalation of the trade war in May. As Alibaba Group Holding Ltd. and Tencent Holdings Ltd. report earnings this week back-to-back, they’ll try to show the punishment is overdone.

The brutal market selloff began three months ago as Donald Trump’s administration slapped restrictions on Chinese national champion Huawei Technologies Co., drawing the ire of Beijing. The Hong Kong benchmark has slid more than 10%, with the two giants dropping by similar amounts.

Yet Alibaba and Tencent’s businesses are largely domestic, having little to do with the US or trade. Tencent is back on track after a horrendous 2018, with revenue growth projected to rebound to 27% in the June quarter thanks to hits like Peacekeeper Elite and durable titles like Honour of Kings. Alibaba, coming off a record June online promotional blitz, is expected to report revenue growth of 38%.

‘Despite growth concerns, a few China internet companies have performed quite well recently, especially in e-commerce and gaming,’ said Jerry Liu, a Hong Kong-based analyst at UBS.

Alibaba, in particular, needs a strong quarter when it reports on Thursday. The e-commerce giant is weighing a secondary listing in Hong Kong that could raise as much as $20 billion, though the target is in flux. Shares are down by about 12% over the last year, while its price to earnings ratio, based on financial estimates for the next 12 months, is about 24, compared with Amazon’s roughly 70.

Raising capital could help replenish ammunition for the e-commerce giant, currently engaged in a cash burning battle for on-demand and food delivery services with Meituan. It’s one of the areas where Alibaba is struggling. Alibaba’s Ele.me’s market share may have lost another 2 percentage points in food delivery to 36% in the second quarter compared with three months ago, according to David Dai, a Hong Kong-based Bernstein analyst.

The worst seems to be behind for Tencent, which reports on Wednesday. After a year of not being able to monetize its most popular gaming genre, the social media giant has finally won regulatory approval to make money from its latest title, Peacekeeper Elite. The new battle royale game, where players engage in a fight to the death, has been toned down in violence to appease government concerns.

That said, regulator approval rates for games have slowed down. Monthly approval rates have fallen from more than 200 games a month in the first quarter to less than 50 games per month in the second quarter, according to government website data.

Apart from gaming, Tencent is expanding its services on WeChat — the instant messaging app with 1 billion users. It is attracting more users to its mini programs, lite apps that allows users access to services from other companies, including ride-hailing, food delivery, bike sharing and ordering food at restaurants.

The company is fending off ByteDance Ltd., parent of the popular short video services Douyin and TikTok. Tencent had six out of the top 10 apps in China in terms of time spent in June, according to research by QuestMobile and Nomura. Tencent’s WeChat alone accounted for 20% time spent share among Chinese mobile users and its QQ was next with 6.1%, followed by Douyin at 5.8%.

‘Investors have some concerns about macro conditions and trade war, but if you look long term, the fundamentals are more stable,’ said Liu.

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