CDPQ’s Indian investment | A number two with a tumultuous past at Azure

Azure Power Global, into which the Caisse de depot et placement du Québec (CDPQ) has injected half a billion, is not only shaken by internal irregularities. Money laundering charges hang over its second leader, over his past role in a financial scandal.

Pawan Kumar Agrawal has been the Indian solar power producer’s chief financial officer for more than four years. He was therefore well in the saddle when he was pinned, in 2021, by the Directorate of Enforcement (DE) – the Indian agency responsible for investigating financial crimes. He is still at Azure, where he is responsible for ensuring finances are in order as major irregularities loom over the company.

The CDPQ was already in a strong position at Azure with a 41.4% stake when Mr. Agrawal arrived in 2019. Later that year, the institution was a 49.4% shareholder. For François Dauphin, director of the Institute on the governance of private and public organizations (IGOPP), in Montreal, the allegations against Mr. Agrawal are worrying.

“As the chief financial officer, you are in a way the watchdog of reliability and controls,” the expert said in a telephone interview. Wouldn’t there be another CFO available and free from suspicion? The question is relevant. »

La Caisse declined to comment on the situation of Azure’s chief financial officer.

Big hit

Employed by Yes Bank – which ranks in the middle of the pack among the 22 largest private financial institutions in India – Mr. Agrawal and about 20 other senior executives are said to have enabled the Bombay-based bank to make loans that should never have been granted because they were considered too risky.

These details are contained in a voluminous 101-page affidavit produced by the Indian agency on 1^er October 2021. The Press obtained a copy of the document.

“It is clear that Mr. Agrawal participated in this money laundering scheme by not performing his duties properly, which resulted in losses for investors and the public”, is it written in particular in the document, which addresses the same reproaches to the other presumed culprits in this case.

The allegations have yet to be proven in court. According to Indian media, the defendants had been arrested before being released on bail.

The main defendant in the case is the former CEO and co-founder of Yes Bank Rana Kapoor, who has temporarily found himself behind bars. The crimes were allegedly committed between 2017 and 2019. According to the Indian authorities, in an attempt to dissuade his subordinates from sounding the alarm, Mr Kapoor offered them generous salary increases as well as other advantages, such as promotions .

In the tournament

Majority shareholder of Azure (53%), the CDPQ has seen its investment in the company melt like snow in the sun since last August. The solar energy producer is in turmoil after revealing irregularities raised by a whistleblower. This sent its stock price plummeting on the New York Stock Exchange. Result: the investment of Quebecers’ woolen stocking in Azure is only worth 127 million US (170 million CAN).

Unable to present audited financial results, Azure escalated its case last month in an update. Three new solar projects are subject to irregularities and the company’s financial situation is increasingly precarious. Its reserves may be insufficient.

Prior to leaving Yes Bank, Mr. Agrawal – who also worked at Ernst & Young during his career – ran its corporate finance unit in the infrastructure niche. In his testimony, the latter explained that the work of his team was to examine the various parameters of the bank’s transactions.

A big deal

The ED’s affidavit focuses specifically on one transaction. It is a credit facility fraudulently granted by Yes Bank to the Indian conglomerate Avantha.

In his testimony, Mr. Agrawal concedes that he would have, “under normal circumstances”, rejected the loan deemed irregular “due to the lack of financial solidity of the borrower”. However, he did nothing to abort or denounce the transaction with Avantha.

” [Le dirigeant] of Yes Bank and others [cadres] of the bank participated in a criminal conspiracy to set up fictitious agreements in order to give the appearance of authenticity to the loan,” reads the sworn statement, in which it also says that Mr Kapoor enriched himself. “illegally”, without offering further details.

For the Indian authorities, this constitutes an embezzlement of funds resulting in losses for investors and depositors.

This case resulted in a loss of approximately 75 million for the bank. However, the Indian agency points out, in the affidavit, that at least 71 loans totaling more than 5.1 billion went wrong under Mr. Kapoor’s leadership. The affidavit does not comb through every transaction.

All of this contributed to weakening the Yes Bank, plunged into a crisis in the spring of 2020 due to the deterioration of its commercial loan portfolio. The situation escalated to such an extent that depositors’ withdrawals were capped temporarily before the financial bailout of the institution of private investors and the government, which led to a major overhaul of governance.

Azure aware

Azure briefly touched on the matter in filings with US regulators. However, it does not give details on the actions that would have been taken. The company did not respond to questions from The Press.

It was therefore not possible to know whether, for example, Azure conducted its own investigation or whether Mr. Agrawal has been framed differently since he was accused.

With the collaboration of Francis Vailles, The Press