Vikram Akula quits SKS, board laps up resignation

Finally, it’s the end of the road for Vikram Akula at SKS Microfinance, a non-profit company he founded in 1997, only to convert it into a for-profit company in 2005.

At a time when speculation was rife that the company’s board was all set to sack him as the chairman of the only listed microfinance institution, Akula is said to have volunteered to put in his papers. The board of directors of the company, which met in Mumbai on Wednesday, accepted the resignation immediately and relieved him of the responsibility of heading the company.

However, Akula would continue as a consultant for the company till March 2012 to help the new management handle the transition. The board has replaced Akula with Puranam Hayagreeva Ravikumar, an independent director of the company. Ravikumar has been appointed the interim non-executive chairman of the company with immediate effect.

PH Ravikumar has been on the board of SKS Microfinance for five years and has also been the chairman of the audit committee for four years. A commercial banker with more than 37 years of experience in the financial services sector, Ravikumar was part of the core team which set up and built ICICI Bank from scratch. At one point, he was also the founder managing director and CEO of National Commodities & Derivatives Exchange Ltd.

The exit of Akula, who was once named one among the 100 most influential people by the Time magazine, has been in the realm of speculation for sometime now.  

“I am confident the current leadership is well equipped to take SKS into the next phase of its evolution. I will, of course, remain committed to the sector, and will continue my involvement in the industry at a policy level.  I will also be involved in a mobile banking initiative,” said Akula.

The news of Akula’s exit was also lapped up by the Street on a day when the stock market was bleeding. SKS’ stock on BSE closed at `116, a `5.50 gain over the previous close. However, the closing price on Wednesday was still the new low for the scrip.

Though the company officials were not keen on discussing the details of the crucial board meeting leading to the exit of the company’s founder, sources said the new management was also keen on changing the business model from being an exclusive micro-lending institution to a broader financial services company though the focus would be on rural markets. However, the source said, a final design of the new model is yet to be decided.

In fact, the investors and board of directors are believed to be unhappy with the way Akula had converted the corporate entity into his personal fiefdom. It was during Akula’s rule, SKS’ CEO Suresh Gurumani was sacked, which was a rare occasion in the corporate history. However, even after appointing M R Rao as the company’s CEO replacing Gurumani, Akula is said to have established a committee to report to him directly instead of making the CEO as the company’s pointsman.

For the second quarter, the company’s revenues stood at about `122.99 crore as against `163.55 crore in the first quarter. The revenues for Q2 of the previous year, however, were at about `366.57 crore.

For the quarter to September-end 2011, the company’s losses rose to about `384.54 crore as against `218.74 crore in the June quarter. SKS had a profit of about `80.54 crore in the second quarter of the previous financial year.

SKS Microfinance has been witnessing dwindling profits for the last one year particularly after the Andhra Pradesh government promulgated an Act to check the coercive recovery practices of MFIs. Under pressure, SKS has been writing off bad debts. The company has already written off about `822 crore in its AP portfolio and is likely to continue to write off another `678 crore, which have remained unrecovered in Andhra alone.