Sanjeev Gupta draws scrutiny over Wyelands Bank loans

When Wyelands Bank began offering highly attractive deposit rates to UK savers in 2017, the newly minted challenger to traditional high-street lenders said it would use their money to support industrial businesses in vital need of funding.

“I believe strongly in the revival of British industry,” said the bank’s owner Sanjeev Gupta, an entrepreneur dubbed Britain’s “saviour of steel” for his rescue of ailing plants across the UK. “Wyelands Bank will be a champion of those businesses which have vision and ambition.” 

Two-and-a-half years later, Mr Gupta’s bank has come under regulatory scrutiny for its funding of one particular business: his own.

Mr Gupta, 48, has long relied on unconventional financing to help build GFG Alliance, his family’s loose collection of industrial businesses that has grown into a sprawling empire with $20bn in annual turnover. 

GFG has turned to Wyelands for some of this funding. The bank, whose customer deposits exceed £700m, says it operates independently from Mr Gupta, but has always made clear that its business plan relies on sourcing clients through “introductions” from its owner. 

Under UK financial regulations, banks are typically permitted to lend up to 25 per cent of their core capital to related parties — such as affiliated companies and individuals.

However, it appears from a Financial Times investigation drawing on interviews with former employees of GFG, internal documents and UK company filings that Wyelands has sometimes worked around these restrictions by routing transactions that financed GFG’s companies and assets through a series of seemingly independent intermediaries. 

Although Wyelands did not classify these entities as related parties, some GFG employees referred to them as the “friends of Sanjeev,” according to three people familiar with the matter.

The FT has identified 19 of these companies that entered into transactions with GFG, including business acquisitions or the purchase of metal products that were financed by Wyelands. 

Some of these UK entities are akin to shell companies, having only £1 of assets when they received loans from Mr Gupta’s bank, while some even declared themselves to be dormant companies.

Wyelands, which is named after the Welsh country estate Mr Gupta owns with his wife, structured many deals with GFG so its immediate exposure was split across several seemingly independent entities, two people familiar with the matter said.

Dalvinder Singh, professor of law at the University of Warwick, said that lending to companies within the same broader group must be on “clear commercial terms” and that “there are rules around large exposures”.

“That means you can’t expose a significant amount of capital to any one particular sector or client,” he said. “Generally, if you look back in history, most bank failures were as a result of large exposures.”

Wyelands did not class these intermediaries as related parties, according to two people familiar with the matter, even though the owners of these companies often had longstanding links to GFG, with some having worked directly for Mr Gupta or his father, Parduman.

“I think there was very much a superficial look at clients brought in by GFG,” said one person familiar with Wyelands’ credit approval process. 

One entity that received funding from Wyelands, Platinum Commodities, is controlled by Anurudha Delgoda, who was a longtime senior executive at Simec, the branch of GFG owned by Mr Gupta’s father.

Another, BCL Commodities, is controlled by Guglielmo Occhi, an Italian businessman whose LinkedIn profile described him as the “head of trading” at Mr Gupta’s Liberty Commodities.

Mr Delgoda and Mr Occhi did not respond to requests for comment. Mr Occhi’s LinkedIn profile was deleted after the FT approached GFG Alliance for comment.

A spokesman for GFG said that Wyelands had always relied on introductions from Mr Gupta’s “broad network of business associates, contacts, friends and former colleagues”.

“That plan was made abundantly clear to customers, depositors, investors and to regulatory authorities,” the spokesman added.

Last year, the Prudential Regulation Authority, the UK’s banking watchdog, began a review of Wyelands’ related party lending, according to two people familiar with the probe. 

The PRA declined to comment. Wyelands declined to comment on its interactions with regulators and relationships with customers.

Documents seen by the FT show that in 2018 Platinum and BCL were counterparties in a so-called receivables facility between Wyelands and one of Mr Gupta’s steel companies in Sheffield. Receivables financing is a way of raising money from customer invoices.

This facility provided tens of millions of pounds of cash upfront for Mr Gupta’s company Speciality Steels. Two people familiar with the deal said that Wyelands did not class it as a related party transaction because the bank would be repaid by Platinum and BCL when they settled invoices for steel products they had ordered.

BCL and Platinum were also among 12 entities that in 2018 borrowed money from Wyelands to buy hydropower plants in Scotland from Simec. UK company filings show that Simec’s chief financial officer Rajeev Gandhi signed loan documentation on behalf of all 12 companies.

A spokesperson for GFG said that the companies that acquired the Scottish hydro plants from Simec made “independent and informed investment decisions, using their own resources” and that the deal was “structured under the advice of one of the UK’s largest law firms”.

Mr Gupta has come far since he began building a business as a commodities trader out of a Cambridge university dorm room in the early 1990s. More than two decades later, he embarked on an ambitious run of acquisitions, snapping up everything from a coal mine in Australia to Europe’s largest aluminium smelter in France. 

Our business activities are based on mutual interest and trust developed over years

The empire was christened the “Gupta Family Group” or GFG Alliance, with some businesses owned by his father’s company Simec and others part of Mr Gupta’s Liberty House group.

Having outgrown its original headquarters in Mayfair, GFG last year set up a second London office a stone’s throw away, leasing five floors of an even bigger building from a familiar landlord: Wyelands. 

The bank was already attracting scrutiny when it disclosed the £60m purchase of Mr Gupta’s new offices last August. Weeks earlier, City grandee Paul Myners had raised a question in parliament about the bank’s related party lending, following a previous FT investigation that first revealed the extent of its links to Mr Gupta’s industrial empire.

While Mr Gupta’s empire has grown rapidly, GFG makes frequent use of a small London-based accountancy firm called King & King for audits of its industrial businesses. UK corporate records show that the firm, which has three partners, signed off the accounts of at least 30 UK companies controlled by Mr Gupta last year.

More than half of the 19 entities the FT identified were either audited by the accountancy firm or had their registered address at its Regent Street offices.

Sunil Pasi — owner of one of these entities, Sterling Resources International, which was involved in the Speciality Steels deal alongside Platinum and BCL — said that his company was independent from GFG, but had done business with the group for a “very long time”.

“Our business activities are based on mutual interest and trust developed over years,” he told the FT.

King & King did not respond to requests for comment.

Wyelands lost its own auditor in November when PwC suddenly resigned, citing a potential conflict of interest. While two people familiar with the matter said growing scrutiny of Wyelands’ lending practices had made some audit firms reticent to take on the mandate, the UK’s eighth-largest auditor, Mazars, is now set to take over. A spokesperson for Wyelands confirmed that Mazars would succeed PwC.

Mazars and PwC declined to comment. 

Wyelands is now in the process of winding down transactions with the entities some GFG employees referred to as the “Friends of Sanjeev” due to the regulatory attention, two people familiar with the matter said. The Scottish hydropower loans were repaid last year, for example.

But UK filings show that other debts related to these transactions are still outstanding, including $34m of inventory financing linked to Liberty’s Dunkirk aluminium smelter and a series of loans related to the so-called “Little Red Boxes” — portable containers that can convert waste oil into power — at GFG’s plants. 

A spokesperson for GFG said that the group “frequently does business with trusted acquaintances and friends who go back a long way and is proud of doing so”.

“Notwithstanding this, GFG Alliance is reviewing the terms of its relationship with Wyelands Bank in order to ensure that all dealings continue to conform to the highest standards of transparency and governance.”

Letter in response to this article:

GFG raises money from a variety of institutions / From Sanjeev Gupta, Executive Chairman, GFG Alliance, London, UK