India Regulator Forces Out Embassy REIT CEO Aravind Maiya

Aravind Maiya stepped down as chief executive of India’s first listed real estate investment trust on Tuesday after the Securities and Exchange Board of India (SEBI) directed the manager of Embassy REIT to suspend him from the position.

The decision by India’s primary market regulator comes after the National Financial Reporting Authority (NFRA), which supervises auditing and accounting in India, in August disbarred Maiya from the industry for a period of ten years due to lapses in his professional conduct as auditor of cafe operator Coffee Day Enterprises Ltd during the 2019 financial year.

“It is evident that Maiya’s serious professional misconduct during the audit of a listed public company, as held by the NFRA, displays a complete failure to act in public interest,” said Ashwani Bhatia, the whole time member of SEBI. Bhatia also added that Maiya cannot be considered competent to supervise Embassy REIT as CEO of its manager, which requires prudent discharge of fiduciary duties, protection of unitholders’ interest and compliance with valuation and audit.

The regulator’s action comes two months after the Indian REITs Association under SEBI’s guidance launched Data Benchmarking Institutions, aimed at improving capital market transparency and strengthening protection for investors after Embassy REIT opened what is now an INR 1.4 trillion ($16.7 billion) with its market debut in 2019.

Following the regulator’s announcement, Embassy Office Parks Management Services, which manages Embassy REIT, said Maiya will assume the role of head of strategy for the trust.

Related Party Deals

The action against Maiya stems from his work leading the auditing of Coffee Day Enterprises for the 2019 financial year when he was a partner at chartered accounting firm BSR and Associates LLP.

After SEBI in January 2023 penalised Coffee Day for fund diversion, the NFRA initiated an independent examination into BSR and Associates auditing of the cafe operator.

The regulator found that, led by Maiya, BSR’s team demonstrated serious lapses in professional conduct, absence of due diligence and negligence in verifying the business rationale for INR 22.2 billion ($263 million) of loans by Coffee Day to a related party.

Following the NFRA examination, SEBI in October notified Embassy REIT’s manager that Maiya did not meet the “fit and proper person” criteria for acting as CEO of the listed trust. Those criteria require that a person maintains integrity, reputation, character, absence of convictions and restraint orders and competence including financial solvency and net worth.

With over 22 years of experience in real estate, capital markets, audit and consulting, Maiya had been appointed CEO of the REIT’s manager in July 2023.

Before taking up the CEO role with Embassy, the Bangalore University graduate had served a briefly as CFO of Tata Realty and Infrastructure Ltd after the member of the Institute of Chartered Accountants of India had been CFO of Embassy REIT from May 2019 to May 2022.

India’s First REIT

Previously backed by US investment giant Blackstone, Embassy REIT owns and operates 51.1 million square feet (47.4 billion square meters) of 14 office parks in Bengaluru, Mumbai, Pune, the National Capital Region of Delhi and Chennai. The trust’s portfolio also includes four operational business hotels, two under‑construction hotels, and a 100-megawatt solar park.

Embassy REIT last month reported INR 8 billion ($94.8 million) in net operating income for the July to September period, a 12 percent increase from the same quarter a year earlier. The trust leased 2.1 million square feet (195 thousand square meters) across 24 deals during the quarter, including 1.3 million square feet of new space and 4 million square feet of renewals at 71 percent rent reversions. “We are pleased to revise our leasing guidance upwards to 6.5 million square feet,” Maiya had said after the company reported its financial results.

Last December, Blackstone sold its remaining 23.59 percent stake in Embassy REIT for around INR 71 billion via block sales on Indian stock exchanges.

So far, Manhattan-based Blackstone has sponsored three REITs in India, including Embassy Office Parks REIT, Mindspace REIT, and Nexus Select Trust.

Blackstone sold 330 million units in Nexus Select Trust for around INR 45.5 billion through a block deal in August. Previously, the US private equity giant sold its entire 9.2 percent stake in Mindspace REIT to the Abu Dhabi Investment Authority for $235 million in 2020.