CEO ducks SKS Microfinance boot

The HC has allowed sacked CEO Suresh Gurumani to continue as director.

The perplexity at SKS Mincrofinance got deeper with the Andhra Pradesh High Court in an interim order allowing the sacked CEO and MD Suresh Gurumani to continue as a director. Earlier in the day,SKS Microfinance said that it has replied to the communication from market regulator Sebi over the sacking of Gurumani,amid its stock plunging by nearly 6 per cent today.

The country8217;s largest microfinance company is at the centre of controversy after it sacked Gurumani two months after it successfully raised Rs 1,653 crore through an initial public offer.

Rejecting a plea by a shareholder called Lekha to stay Gurumani8217;s ousting as CEO,Justice Bhavani Prasad in his order,however,refrained M R Rao,who replaced Gurumani from taking any new policy decisions without prior consultation of the board.

The court also asked the company to hold general meeting to obtain the shareholders8217; consent on directorship.

A spokesperson of SKS Microfinance said they will decide the date of conducting EGM on Monday or Tuesday.

The petitioner in her complaint alleged that SKS violated corporate governance by terminating Gurumani as MD as only shareholders can terminate the MD since they have approved the appointment.

On October 4,the board of the Hyderabad-based company had terminated the services of Gurumani four years ahead of its expiry and named M R Rao as his successor. Gurumani had a five-year contract from April 1,2009 to expire on March 31,2014. The company in its notification to stock exchanges did not attribute any reason to his termination.

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The shareholder alleged that they were misled as the prospectus of the IPO had projected Gurumani as one of the key officials with expertise.

Market sources said regulator SBEI has asked whether the termination of Gurumani was planned when SKS filed the draft prospectus with it in March for IPO. The company declined to give details of the correspondence from Sebi.

SKS Microfinance spokesperson Atul Takle only said,8221;We received a communication from Sebi yesterday to which we have replied today,8221; he said,adding that it is a matter between Sebi and SKS. 8220;It is a legal explanation and we are not commenting on it,8221; he said.

Sources said the company is fully compliant to the SEBI regulations.

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The company had filed the prospectus with Sebi on March 25 and shares were alloted to IPO investors on August 12.

SKS was the first microfinance company to get listed in India. The initial shares sale offer had fetched the company over Rs 1,600 crore in July.

Shares of SKS closed 5.66 per cent down to close at Rs 1,228.25. In the afternoon trade the scip had plunged over 8 per cent on the BSE.

Gurumani was earlier director at consumer banking at Barclays. Following his appointment,SKS founder Vikram Akula moved to the role of non-executive chairman.