It was the epitome of a professionally-managed world-class microfinance institution using the stock market to raise money and enable it to reach the poor. Instead, the high-profile SKS Microfinance story is slowly turning out to be a predictable corporate power play between founder and chairperson Vikram Akula and professional manager and non-executive director Suresh Gurumani, who has been stripped of his position as CEO and Managing Director.
“Ek myan mein do talwarein nahi reh sakti (two swords cannot be stored in one scabbard),” a director on the SKS board told Hindustan Times on the condition of anonymity. “The professional CEO ran the company well and led it to a successful IPO. But the promoter wanted to run the company. He had different ideas than the professional CEO and that led to his termination.”
The concern is on timing. Barely a month after a successful listing, the SKS board shunted out Suresh Gurumani, who took over as CEO in December 2008 and was instrumental in the company’s high growth.
Akula said there was no issue of performance or financial irregularity but claimed that it was a result of “interpersonal conflict” with the rest of the management after the change in the dynamics of the microfinance industry, post-IPO.
“SKS is about to enter its second phase of growth through the launch of new products like micro-housing, which require deep and intimate knowledge of microfinance,” Akula told Hindustan Times on Tuesday.
“The change is for the next phase, and MR Rao is best suited.” Rao has served the company as chief operating officer for four years.
Akula did not give any answer to what led to the conflict. He did not respond to queries for this story. “The company does not have anything to add beyond what it said on Tuesday,” a spokesperson said.
Gurumani, the silent centre-point that this controversy has revolved around, too was not available for comments.
To put the termination in context, in its 12-year history, SKS has seen four CEOs.
A senior microfianance professional, who is an old hand in the microfinance business and refused to be identified, said that this is a result of the immaturity of the company and its board.
“The person I have known has high integrity,” he said referring to Akula. “The problem may be part of the maturity process. It takes some time for a company and people behind it to realise that they have gone public and are now under the public glare. They can’t say ‘I won’t tell’. They will have to come clean.”
Worrying the microfinance professionals is a potential Satyam-like situation in this industry in the markets. “The S-word is scaring us,” he said.
On July 16, the company approved a bonus and increment for Gurumani. Two months later, an October 4 order terminated his services.
A research paper by MS Sriram at IIM Ahmedabad had raised this issue as far back as March 2010. Titled ‘Commercialisation of Microfinance in India: A Discussion on the Emperor’s Apparel’, the paper suggested that this is not the only case of conflict. There were cases of conflict even before the SKS IPO hit the market and three high-profile individuals resigned from the advisory trust of SKS within three months of their joining.
Author Gurcharan Das, Anu Aga of Thermax and Narayan Ramachandran of Morgan Stanley were on the board of this trust, days before the prospectus was filed. “Their sudden resignation in March in the run up to the filing of the prospectus raises questions,” the paper stated.
(With inputs from Sachin Kumar)