IFCI board sees exodus as govt tries to get management control

Barely a fortnight after the Industrial Finance Corporation of India (IFCI) became a state-owned company, its board looked set for a major rejig on Friday. The government replaced two of its nominee directors, while four of the company’s independent directors stepped down. More resignations are likely in the next few days.

The move is seen as a precursor to the government getting the management control of the institution. The decision on fate of Atul Rai as the company’s CEO is being keenly awaited.

IFCI informed BSE the government had nominated Anurag Jain, a joint secretary in the finance ministry, on its board; while Sanjeev Kumar Jindal, a director in the ministry, and V K Chopra, a deputy secretary, were being replaced.

Independent directors Shobhit Mahajan, Atul Ashok Galande and S Shabbeer Pasha also resigned from the board. Later in the day, the firm informed another independent director, Vijendra Singh Jafa, had also put in his papers. Its whole-time director Sujit Kumar Mandal had resigned last month. (Click for tables)

The IFCI stock surged 11.39 per cent to Rs 38.15 on BSE on Friday.

The finance ministry, however, downplayed the board recast , calling it a routine exercise. A finance ministry official said the four directors had resigned as it was their moral duty to do so after the firm’s control had shifted to the government. He added there was no pressure on the directors.

A news agency quoted Financial Services Secretary D K Mittal as saying that the IFCI board had been dissolved. But when contacted by Business Standard, Mittal, denied saying so. He said only the Company Law Board could take that decision.

“This is customary, as the majority holding has changed hands,” he said, adding the final decision would be taken by shareholders at the company’s next extraordinary general meeting.

However, a person familiar with the development said the government had asked 10 of the 12 board members to resign. Rai and Usha Sangwan, nominee of Life Insurance Corporation, IFCI’s second-largest shareholder, were possibly the two people who had not been asked to step down, he said.

Mittal denied the government had asked 10 board members to step down.

An independent director who resigned confirmed he did so after being asked by the government, which wanted to reconstitute the board. “I had no option,” he added.

It was expected the government would replace the management after getting majority stake. However, Rai was always seen as the main target.

An IFCI executive confirmed neither the government had so far asked Rai to go, nor the CEO himself had offered to resign, unlike other board directors, who didn’t have any significant shareholding in the company. “The CEO of a company can’t go away like that. He has a lot of responsibility,” the executive added, though he didn’t rule out the possibility of Rai being asked to step down at a later stage.

Rai, as well as a company spokesperson, declined to comment.