Narayana Murthy speaks out, wants Akula to be open & fair

NR Narayana Murthy, the founder of IT bellwether Infosys Technologies, has expressed displeasure at the hush-hush manner in which the affairs at SKS Microfinance are being conducted.

In a communique, Murthy, an investor in SKS through his venture capital fund Catamaran, asked the company to be “open, honest and fair in all matters dealing with every stakeholder.”

According to sources, M R Rao, the new CEO of SKS, went and met Murthy in Bangalore on October 13, days after ousting the then CEO Suresh Gurumani.

Vikram Akula, the founder of SKS and the executive chairman of the company, also participated in the meeting through a teleconference.

Though the meeting discussed various issues with prime focus on using IT for scaling up the company’s operations, the message from Murthy was delivered straight to the duo.

However, the company continues to take it easy. Its second quarter board meeting on October 22 was held behind iron curtains with a gag order on the directors against talking to media or making any comment on the boardroom developments.

Sources said Murthy has not met anybody from the company or had any interaction with the management since asking it to be open and fair.

The ouster of Gurumani continues to be a mystery. The company management has not come out with any explanation on the termination of the CEO.

Vikram Akula had earlier said, “It was an interpersonal conflict. I am not at liberty to say anything beyond this.”

What is also bothering investors is the way the company is neglecting the formation of an advisory council to which Murthy was named chairman.

According to sources, the council is still not in place and not a single meeting has been held so far.    

The council was expected to play an advisory role for conduct of business, though the decisions would finally be taken by the board.

SKS officials refused to comment on the issue when DNA sought to know why the council was not in place.

Catamaran invested Rs28.1 crore in SKS Microfinance on January 16, 2010 for 937,770 shares, representing a 1.3% stake in the company, on a fully-diluted basis.

Catamaran’s shares in SKS Microfinance would be locked for 24 months from the date of investment. In addition to the contractually-agreed lock-in, these shares are also subject to a concurrent statutory lock-in imposed by the Securities and Exchange Board of India on all pre-IPO investors for 12 months post-IPO.

Therefore, exit is currently not possible as per the law.

“Catamaran will take that decision solely based upon data and facts at an appropriate time,” the document said.
According to sources, Catamaran had done a detailed exercise before investing in SKS in the rural parts of Karnataka and Andhra Pradesh where “borrowers perceived value in microfinance, provided that lending was done openly, fairly and at their door-step.”