Troubled and cash strapped High Mark has been offered Rs30 per share by Italian credit information agency CRIF, an existing shareholder. CRIF is headed in India by old hand Larry Howell. In his previous inning, Howell successfully brought together TransUnion, which he was heading at that time, and CIBIL, India's first credit bureau
Italy-based credit services provider CRIF is trying to buy a controlling stake in High Mark Credit Information Services Pvt Ltd and given the present situation at the Indian bureau, it may well succeed. According to sources, Larry Howell, chairman of CRIF International Advisory Board is leading the negotiations with investors and promoters of High Mark. Howell represents CRIF as director at High Mark. CRIF SpA already has 9.09% stake in High Mark.
Howell was also instrumental in bringing together TransUnion and Credit Information Bureau (India) (CIBIL), India’s first credit bureau. Howell was president of TransUnion International for Asia and Europe, where he oversaw credit operations in several markets, including India, Italy, Thailand, Mainland China, Russia and Hong Kong, before joining CRIF.
According to sources, CRIF has offered to buy 26% stake in High Mark at Rs30 per share or about 3.4 million euro. The offer is valid only till 31st December. Among the investors are stock speculator Rakesh Jhunjhunwala (4.55%) and financial services company, Edelweiss (9.09%), apart from a host of banks and a few financial services companies. They have subscribed their shares at Rs12.25 apiece. In addition, CRIF said it would not block the initial public offering (IPO) of High Mark, if other shareholders also agree either to guarantee a loan, make a direct loan or invest similar amounts that of CRIF (Rs30 per share or 3.5 million euro), in case the Indian credit bureau needs funding.
As pointed out in our earlier stories, High Mark is in dire need of funds to remain operational. Bereft of a management team, which left the Bureau over differences with chairman Prof Anil Pandya and the unequal distribution of employee stock ownership plan (ESOP), High Mark is in a particularly tough spot because it does not have money to run the operations beyond two months.
According to sources, the company has almost run through the Rs43 crore it raised and is about to cease operations in a couple of months, unless it finds a new investor. Prof Pandya, in an email told Moneylife that “High mark is raising funds to maintain its momentum in the market."
Earlier, when High Mark tried to raise funds through a rights issue, several of its existing investors refused to participate. Sources say that some of these investors are miffed at the changes at the top, such as Sidhharth Das who was the chief operating officer and Kiran Moras who was the architect of the system.
CRIF’s offer to High Mark shareholders suggests a change of name to High Mark CRIF India, from High Mark. According to the terms of the offer, the board of High Mark would appoint a management committee of three people. The chief executive (CEO) of High Mark would report to this committee headed by a representative of CRIF.
In addition, post takeover, the executive chairman of High Mark, Anil Pandya, will become non-executive chairman, 60 days after hiring a new CEO.
While the present board at High Mark was generous in doling out ESOPs and paid trips abroad to its directors, the same may not be possible post the takeover. Howell in his offer has categorically ruled out granting any ESOPs and foreign travel expenses to directors of High Mark, except for the non-executive chairman. CRIF’s offer, after being accepted by High Mark shareholders and the board will have to be acceptable to the Reserve Bank of India as well.
As reported earlier by Moneylife, four independent directors, Dipankar Basu (1.63 lakh), Vepa Kamesam (1.63 lakh), Rajiv Johri (6.53 lakh) and Shyam Sunder Suri (6.53 lakh) and its chairman Prof Anil Pandya (3.27 lakh), together hold 70% of ESOPs in High Mark. (http://www.moneylife.in/article/high-mark-credit-four-directors-and-chairman-bagged-70-of-the-esops/30316.html). It was not clear to the employees what exactly they have contributed after getting the licence from RBI.
Read the previous two articles on High Mark here: High Mark Credit: Four directors and chairman bagged 70% of the ESOPs and Is High Mark Credit Info about to cease operations?