Newsmaker: Arvind Rao

'Weaknesses in processes' oust risk-taker from own company

During the heyday of mobile value-added-service (VAS) provider OnMobile, CEO and Managing Director Arvind Rao was known as a man with a Midas touch. Today, he is no longer at the helm of the company, having resigned in ignominy under allegations of financial malfeasance within the firm which he, as CEO, has shouldered responsibility for. The company officially chose to describe the discovery as ‘weaknesses in processes’ — a declaration that came after a special review was completed by the company’s legal advisors, Amarchand Mangaldas and Suresh A Shroff, assisted by accounting firm KPMG.

Allowing Rao to leave was perhaps the best option available, since letting him continue would have raised further suspicion among shareholders at a time when share prices had already taken a beating.

People who know him closely say Rao was ambitious from the first day. During his days at Indian Institute of Technology-Mumbai, he came in contact with Nandan Nilekani, co-founder of Infosys, his batchmate. It was Nilekani and Phaneesh Murthy (then the head of global sales at Infosys) who were instrumental in attracting his attention to a product that a team at Infosys, headed by Mouli Raman (one of the founders of OnMobile, now designated interim CEO) was pursuing at the time.

Then, Rao went to the United States to study Masters in Business Administration in Finance from Wharton School, University of Pennsylvania, and subsequently a Master of Science from the University of Wisconsin. He had a successful career in private equity and venture capital businesses. He also enjoyed a stint at McKinsey & Co, where he focused on the electronics sector.

To what extent he is involved in breaching the corporate governance standards and processes at OnMobile is yet to be ascertained. But Rao’s role in grooming an idea into a product and making OnMobile one of the largest VAS players globally is not a question. It was his risk-taking appetite that prompted a motley collection of engineers at Infosys, part of the internet product group, to spin off into a separate entity, today known as OnMobile. His long association with technology companies in the US, where he was involved as an investor, helped OnMobile change its business model from one that leveraged a product initially sending alerts to websites — to a mobile alert system.

“There was no need to sort of go out and take a big risk with your life and your career,” said Rao in an earlier interview. “But something just bit me where I wanted to work for myself,” he adds. Finding the first customer for the product was a challenge. In 2002, Rao and co-founder Mouli Raman were seriously thinking of shutting after failing to detect much scope for growth.

“We never plan for revenues, we plan for products and we plan for product enhancements,” he says. “We believe that if you do that well, the revenues will happen,” he was quoted saying.

Now, however, OnMobile will need to plan on moving on without Rao, while dispelling any doubt about its corporate governance procedures, while he will focus on clearing his name.