Hyderabad, Oct. 8: The SKS Micro-finance saga has taken yet another turn with the Andhra Pradesh High Court stepping in. In an order passed on Friday, the court has barred the new MD and CEO, Mr M.R. Rao, from taking any major policy decisions without approval from the board of directors. Meanwhile, the court has also directed that Mr. Suresh Gurumani, who had been sacked from the position earlier, will continue to be a director of the company till his termination is approved by shareholders.
The order was passed by Justice G Bhavani Prasad, who was dealing with a petition filed by Ms Lekha, one of the company’s shareholders. In the petition, the shareholder has complained about the violation of corporate governance norms by the board of directors in terminating, Mr Suresh Gurumani, chief executive and managing director, without any reason being stated. The petitioner alleged that the Board violated corporate governance norms by hurriedly passing a resolution terminating Gurumani instead of going to the shareholders. This was evident from the non-participation of lenders in the board meeting.
Reacting to the orders, an SKS spokesperson said, “The High Court decided not to stay the termination of Suresh Gurumani till EGM is convened. It’s a long process ahead. We do not wish to comment further.”
Mr Gurumani had claimed that he was dismissed for “pushing for more and more controls and more risk management structures” in the company and accused the company’s founders of reluctant to give control to professionals.
Meanwhile, the stock price of SKS Microfinance took another beating on the stock exchange, falling by 5.66 per cent to `1,228. The drop was attributed to stock market regulator Sebi’s interest in the case. Sebi had asked SKS for an explanation on Mr Gurumani’s sacking, and whether this termination was planned at the time the firm had filed for its IPO. The company says it has responded to Sebi’s notice, but has refused to divulge any details of its communication.
The SKS stock has lost about 10 per cent of its value from the time of the first announcement on October 4. On that day, SKS Microfinance, in a filing to the stock exchanges, said that it is terminating the appointment of Mr Gurumani as the MD and CEO. In its draft red herring prospectus filed at the time of its IPO, the company had said that Mr Gurumani’s appointment was for a five year period, up to 2014. SKS hasn’t offered an explanation for the unceremonious exit. In a conference call, however, it said that the action had nothing to do with any financial irregularities.