Sanjeev Gupta, executive chairman of Liberty House Group, poses for a photograph in Sydney, Australia, on Monday, March 26, 2018. The British conglomerate tycoon may build up to 10 gigawatts of renewable energy in Australia, including battery storage that could help power steel mills and aluminium smelters. Photographer: Brendon Thorne/Bloomberg
© Bloomberg

Sanjeev Gupta’s challenger bank has invested more than £60m in a property in London’s Mayfair whose main tenant is the industrialist’s family business.

Wyelands Bank, which was acquired by the Indian-born entrepreneur in 2016, has sought to wrestle customers from traditional high street banks by offering attractive savings rates. The bank specialises in lending to small and medium-sized businesses.

It paid £64m for an “investment property in central London,” whose tenants include the GFG Alliance, a group of businesses controlled by the Gupta family, Wyelands’ annual results showed.

The bank, which generated £469,000 of pre-tax profits in the year ending April 2019, acquired a British Virgin Islands company called Mallnick Holding that owns the property, according to accounts filed at Companies House on Friday.

Title documents at the UK’s Land Registry show that Mallnick owns a block of commercial property on Maddox Street in Mayfair.

Five of the six floors of the Maddox Street office are occupied by the GFG Alliance, while the retail space includes a betting shop and a high-end Indian restaurant.

GFG Alliance, a commodities-to-property conglomerate, is not itself a distinct legal entity, with Wyelands’ accounts describing it as an “informal family of businesses”.

A Financial Times investigation last month showed extensive links between Wyelands and other companies that are either part of or closely linked to GFG, raising questions over how the lender was deploying savers’ deposits.

A spokesman for Wyelands said that the transaction was referred to the UK banking regulator, which raised no objections.

“There is no conflict of interest and all transactions have been conducted on an arm’s length basis and on commercial terms,” the spokesman said. “[Wyelands] has no current intention to become either a property investor, or a commercial landlord.”

GFG Alliance declined to comment.

Wyelands’ accounts say it is refurbishing the site to “bring the property up to a suitable standard”. The building is a stone’s throw from Wyelands’ own Mayfair-based headquarters, housed in Mr Gupta’s plush Hertford Street offices.

The bank’s latest accounts show that its deposit base and loan book have both grown by more than 40 per cent since the previous year, standing at £726m and £434m respectively at the end of April. The report notes that its lending activity “continued to benefit from introductions from the GFG Alliance”.

The investment in the property is equivalent to nearly half of the bank’s £133m capital base.

Although the Mayfair property generated £2.5m of rental income for the bank in the year ending April 2019, Wyelands has already taken an over £1m impairment on its investment. The bank’s spokesman said that this impairment stemmed from the “common practice” of writing down the purchase costs of acquiring the property.

The bank also took impairments on its lending book, which is mainly comprised of short-term financing backed by companies’ invoices to their customers. The bank took a £4m provision to cover an expected loss, while noting that several companies were more than 90 days late repaying the bank at the end of April. One of these borrowers still had not repaid Wyelands when its report was completed earlier this month.

“Early signs of supplier payment delays have continued,” chief executive Iain Hunter said, in his introduction to the report. “These have not resulted in defaults in the year but it is an indicator of tougher market conditions.”

Mr Gupta has used financing backed by supplier payments and other assets to partly fuel an acquisition spree of industrial companies in the UK, Australia and Europe. Much of this financing has been arranged by Lex Greensill, an Australian financier and friend of former prime minister David Cameron.

Scrutiny of GFG has sharpened after it was dragged into a crisis at the Swiss investment firm GAM, over investments the asset manager made in hard-to-sell debt linked to Mr Gupta’s business empire. The metals magnate last month repaid the last remaining portion of these illiquid bonds.

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