Within a week of KPMG submitting a forensic report on its corporate governance procedures, OnMobile’s founder, CEO & managing director Arvind Rao has resigned. OnMobile is India’s pioneering and largest provider of mobile value-added services.
After a board meeting, which ended late this evening, a statement issued by the company said Rao put in his papers after a special review by the company “identified weaknesses in some processes”.
“Recognising that these weaknesses took place during his tenure, Rao submitted his resignation with immediate effect and the board has accepted the same,” the statement said. The review of the governance procedures was done by OnMobile’s legal advisors, Amarchand Mangaldas & Suresh A Shroff, supported by KPMG.
While the review identified the weaknesses, strong alternative controls ensured the company did not suffer any loss, the statement added, without clarifying what these weaknesses were.
Meanwhile, according to a statement with the Bombay Stock Exchange, the pledged shares of the promoters of OnMobile — Arvind Rao, Arvind Mohan Rao, Riffmobile Pvt Ltd, Oskar Habitat, Radha J, Jankiraman V, J Ramesh and J Chandramouli — have been invoked and hence their holding in the company is nil.
The company announced that Mouli Raman, co-founder and executive director of the company, had been given the interim role of MD while the search for a new CEO had been initiated. Attempts made to reach Rao were unsuccessful.
The crucial board meeting, under the chairmanship of H H Haight, CEO of Argo Capital, a global venture capital investor and OnMobile’s largest shareholder, followed a raft of controversies that have dogged the company since last year — a period that saw the stock price slump nearly 47 per cent, from Rs 63.40 to Rs 33.60.
Since June, a board sub-committee had been entrusted with the task of running daily operations, after Rao was asked to focus only on international operations. OnMobile has seen the exit of its CFO, Amit Rastogi, who resigned barely three months after joining. Rao was replaced by Haight as chairman of the company in December last year. The following month, two of its independent directors, Sridhar Iyengar, former CEO of KPMG India, and J R Varma, professor of finance at the Indian Institute of Management, Ahmedabad, resigned. Several other senior executives have also resigned since then. OnMobile’s COO and President Sanjay Uppal moved to the US “in an advisory capacity in the short term” and Sandhya Gupta, its M&A head, resigned earlier this year.
Immediately after the news of the forensic audit by KPMG, investors in the company such as Smallcap World Fund and Birla Sunlife Trustee sold their shares through bulk deals. OnMobile was among the first mobile value-added services firms to have listed on Indian bourses. The company had plans to ride the fast mobile growth. However, the slow uptick in such services impacted its domestic business, though the international business grew fast. “The international business has more than compensated for the slump in domestic business, growing 86.9 per cent in FY12 to Rs 284.2 crore from Rs 152.1 crore in FY11,” said a recent ICICI Securities report.
OnMobile, which reported revenues of Rs 537 crore last fiscal, employs about 1,600 people. It has offices in London, Paris, Silicon Valley, Miami and Seattle apart from Bangalore and Mumbai.