R C Bhargava on IL&FS, Maruti boards; his son in investor Abu Dhabi fund

In transactions that raise a red flag over corporate governance standards, the sovereign wealth fund of the Emirate of Abu Dhabi, Abu Dhabi Investment Authority (ADIA), raised its shareholding in the crisis-ridden investment company Infrastructure Leasing & Financial Services Ltd (IL&FS) and Maruti Suzuki India Limited during periods when R C Bhargava was on the boards of both MSIL and IL&FS and his son Aditya Bhargava was employed as investment manager with ADIA.

R C Bhargava chairs Maruti Suzuki board since 2007 and had been its Managing Director between 1985 and 1997. He returned as a director on Maruti Suzuki board in 2003 before taking over as its chairman. He was a director on the board of IL&FS for over 25 years until it was superseded on October 1 by a new board chaired by Uday Kotak that is meant to kick-start the clean-up.

Aditya Bhargava joined ADIA in its headquarters office in July 2012 as Investment Manager, Asia Pacific, Real Estate and Infrastructure Department, responsible for investments in India. A series of stock buy-sell transactions by ADIA in Maruti Suzuki and investment decisions in IL&FS, as per official records, during the father-son duo’s roles in these companies, raise questions of propriety and conflict of interest.


* ADIA which held 11.22 per cent in IL&FS until March 2013 raised it to 12.6 per cent now. ADIA has been an investor in IL&FS since 2006 and started with a 12.5 per cent holding which was diluted over the next six years. However, ADIA raised it to 12.5 per cent through a rights issue in 2014. By virtue of its investment, ADIA had a nominee director on the board of the company even before Aditya Bhargava joined it in 2012. Sanjeev Doshi was ADIA’s nominee director on the IL&FS board before it was superseded.

* ADIA’s shareholding in Maruti Suzuki did not cross the 1 per cent mark until the quarter ending September 2015. It, however, rose to 1.1 per cent in the quarter ended December 2015 and further went up to 1.21 per cent in the quarter ended March 2016. While ADIA pared its shareholding to 1.03 per cent in December 2016, it significantly reduced its holding by the end of the June 2017. ADIA does not appear in the shareholders list since then as its holding reduced to less than 1 per cent.

Incidentally, ADIA’s decision to increase its shareholding in Maruti Suzuki between October 2015 and September 2016 came at a time when Suzuki’s decision to invest in a new Gujarat plant on its own — as distinct from Maruti Suzuki investing in it – was in the process of getting approved by the board of Maruti Suzuki.

Maruti Suzuki board approved contract manufacturing agreement for 30 years with Suzuki Motor Corporation in October 2015. But this was resisted by the minority shareholders including mutual funds in Maruti Suzuki. Hence Maruti Suzuki initiated the process of getting minority shareholders’ approval for the deal which it finally received in December 2015.

Between October 2015 and June 2017 (by when ADIA’s shareholding had dropped to less than 1 per cent in Maruti Suzuki), the company’s stock rose from levels of around Rs 4,300 a share to Rs 7,400 a share. When contacted, R C Bhargava said, “My son has always worked in the Real Estate Division of ADIA, and is dealing with India in that sector only. He is not the Investment manager in ADIA and is not in the Equities investment Division. There is no conflict of interest.”

While ADIA declined to comment on the questions mailed to its spokesperson, a source clarified that Aditya Bhargava is head of India real estate and has no involvement with nor has any visibility on equity investments like these which are subject to Chinese walls. He further said that ADIA’s investment in IL&FS is housed within its equities department — not through real estate and that ADIA had its own board seat on IL&FS during the period in question so had access to the same information that RC Bhargava had access to.

However, even as ADIA and RC Bhargava confirmed that Aditya Bhargava worked in the Real Estate division of ADIA, Aditya’s LinkedIn profile says that he is working as a “senior portfolio manager — Real Estate and Infrastructure Department at ADIA, responsible for investments in India.”

At ADIA, he has also worked as Senior Investment Manager, Portfolio Manager, and Senior Portfolio Manager — all within the Asia Pacific team in the Real Estate and Infrastructure Department.

Maruti Suzuki and Aditya Bhargava did not respond to specific queries.

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