Akula hits a dead end at SKS, but his journey is not over

Almost three years after giving up the top position at the microfinance company he founded, Vikram Akula hoped to return to a leadership role in SKS Microfinance. But the trust that wanted him back on the company board as its representative has shut the door on the erstwhile poster boy of microfinance.

SKS Trust, the sole trustee of five mutual benefit trusts that collectively own the biggest chunk of 12.5 per cent stake in the microfinance company, no longer plans to insist on Akula's reinduction on the board. Also, on SKS Trust's request, SKS Microfinance has decided to "de-promoterise" and exclude Akula and the mutual benefit trusts from its list of promoters. At the end of March this year, Akula held just 10 shares of the company, having sold almost his entire stake after his exit in 2011.

The move has surprised many. SKS Trust had requested SKS Microfinance to induct Akula on its board as the trust representative on September 8, 2013. After the request was denied, it had said that it was exploring legal options, leaving Akula confident of a comeback. "I would love to return to a leadership role at the company. If the SKS board does not respond favourably, I am sure the trusts are ready to take whatever steps (that) are needed," he had told Business Standard.

So, what led to SKS Trust giving up on Akula? There are multiple theories doing the rounds. One says that Akula himself realised that not only would he find it difficult to gain a seat on the board in SKS Microfinance, but it would be almost impossible for him to run the company in the way he wanted it to function.

Akula had founded SKS Microfinance as a non-government organisation in 1997. He had to step down as the chairperson of SKS Microfinance in November 2011, and while no explanation was given about his resignation, it is widely believed that a conflict between Akula and other board members over the running of the company led to his exit.

"The board composition has not changed after Akula's exit. So, even if he returned he would have to work with the same set of people with whom he disagreed over the way the company should be run," says a person familiar with the development in the company on condition of anonymity.

The micro-lender's board currently has seven members - P H Ravikumar (non-executive chairperson), Geoff Woolley (independent director), M R Rao (managing director and chief executive officer), P Krishnamurthy (nominee director of Small Industries Development Bank of India), Paresh Patel (director), Sumir Chadha (director) and Tarun Khanna (independent director). At the time Akula stepped down, all of them except Krishnamurthy were on the board of SKS Microfinance. Small Industries Development Bank of India typically has been replacing its nominee on the micro-lender's board every three years and deputed Krishnamurthy in place of V Chandrasekaran in July 2012.

Biksham Gujja, chairperson of the SKS Trust - considered the man behind the move to get Akula back at the micro lender -, says the trust does not have any control left on SKS. "Despite being the largest shareholder, we do not have any influence on the decision-making process. Hence, we decided to exclude ourselves from the promoters' list," he told Business Standard in a recent interaction. Gujja also said that such a move would help the five trusts to focus on their core activities of furthering financial inclusion while avoiding the onerous responsibilities of complying with various regulatory guidelines as a promoter of a company.

SKS Microfinance has so far maintained that under its articles of association, no shareholder has any right to nominate a director. Industry analysts feel that winning a legal battle over Akula's appointment to the board would have proved difficult for SKS Trust because of this provision.

Insiders claim that the board of SKS Microfinance had not been satisfied with Akula's role when the micro-lender was battling a financial crisis under his leadership. With the company having weathered the tumult and returned to profitability, the board was reluctant to re-appoint him, they say. The micro-lender reported net profit of Rs 70 crore in 2013-14. It had a net loss of Rs 297 crore the previous fiscal.

As for Akula's future, sources indicate that a non-compete agreement signed between Akula and SKS Microfinance at the time of his exit would expire soon. It would allow him to start a new venture on his own in the microfinance industry. Akula was not immediately available for comments. An e-mail sent to him went unanswered.

THE LONG ROAD TO EXIT

Nov '11 SKS Microfinance says Vikram Akula to step down as chairperson of the company

Sep 5,'13 SKS Microfinance informs stock exchanges that Akula has sold his all but 10 shares in the company

Sep 8,'13 SKS Trust says it has requested the company to induct Akula back on the board

Sep 10,'13 SKS Microfinance says under its article of association, no shareholder has the right to nominate a director

Sep 26,'13 SKS Microfinance re-appoints MR Rao as managing director and chief executive for five years

Dec 3,'13 SKS Microfinance holds its annual general meeting

Dec 3,'13 SKS Trust questions re-appointment of Rao, alleges irregularities in the conduct of annual general meeting

Dec 5,'13 SKS Microfinance dismisses allegations

Feb 4,'14 SKS Microfinance announces guidance for 2014-15

May 2,'14 SKS Microfinance announces exclusion of certain entities including SKS Trust and Akula from its promoters' list