SKS Microfin sacks CEO; shares tank

Gives no reason for Gurumani’s termination, but says financial irregularities not an issue.

Hyderabad-based SKS Microfinance on Monday sacked its Managing Director and CEO, Suresh Gurumani. A resolution terminating Gurumani’s services with immediate effect was passed by the company’s board on Monday and notified to the stock exchanges.

Markets reacted sharply to the news. Shares of SKS plummeted 5.81 per cent over the previous close to end at Rs 1,276.50 on the BSE on Monday.

The board replaced Gurumani with M R Rao, who was appointed deputy CEO barely a month ago. When asked why Gurumani had been fired, SKS Executive Vice-President (Corporate Communications) Atul Takle told Business

Standard: “We are not commenting on that.”

However, SKS Chief Financial Officer D Dilli Raj said the termination was “not an issue related to financial irregularities”.

In the course of a conference call with investors on Monday, SKS founder Vikram Akula said, “The move is basically to support the scaling up of operations. It is important to play a proactive role when the company is entering into new areas.” He did not, however, specify what those new areas would be.

On September 7, SKS announced that Akula would be reinstated as executive chairman of the company with effect from November 1. He had relinquished the position and taken on the role of non-executive chairman after Gurumani joined the company as CEO in November 2008.

According to a source close to the developments, with Akula reclaiming the post of executive chairman, restructuring of the top management was inevitable. “For SKS to grow with a clear focus, the company needs top management as a coherent team. So, one person has to make way,” the source said.

A chartered accountant by training, Gurumani was earlier director, consumer banking, at Barclays. His appointment came after SKS raised Rs 366 crore ($75 million) from private equity investors in November 2008 in its fourth round of funding. Sandstone Capital, an India-focused hedge fund with $1 billion capital under management, led the deal. Other investors in the round included SVB India Capital and Kismet Capital.

The SKS board meeting, which was convened on Sunday, was adjourned to Monday. Takle said this was done to ensure the participation of all company directors, including the four who were abroad.

Monday also saw the resignation of Ashish Lakhanpal from directorship of the company. Takle said he had voluntarily stepped down, so that the board composition complies with the prescribed ratio of independent and non-independent directors.

SKS Microfinance was founded as a non-profit organisation in late 1997. It received a non-banking finance company licence from Reserve Bank of India in 2006. The company raised Rs 1,500 crore in an initial public offering in August. According to the SKS draft red herring prospectus, Gurumani had a five-year contract from April 1, 2009 to March 31, 2014.

As of March 31, SKS had 6.78 million women borrowers and total disbursements of more than Rs 14,000 crore. For the quarter ended June 2010, the company posted revenues of Rs 305.56 crore and a net profit of Rs 66.70 crore.