After a two year hiatus, Vikram Akula, the former poster child of the microfinance world, is keen on a second coming to SKS Microfinance. Akula has been nominated to the board by SKS Trust Advisors, which currently holds a 12.6 per cent stake in SKS Microfinance, making it the largest shareholder. Biksha Gujja, head of SKS Trust Advisors believes having Akula’s experience will benefit SKS Microfinance, since it is seen as suffering ‘mission drift’, having abandoned the original vision of the company to focus on social impact. Akula has been quoted in a Business Standard interview saying that he’d love to return to the organization he founded in 1997.
But just like Akula’s exit in 2011, his entry back into SKS Microfinance, is bound to produce much drama before a resolution is reached. After Gujja wrote to SKS Microfinance nominating Akula to the board on September 8th, the former issued a statement to the BSE rejecting Akula’s nomination under the Company’s Articles of Association (AoA), saying no shareholder has any right to nominate a director. Expect hectic backroom parleys to ensue over the next few weeks and months before a clearer picture emerges.
SKS Microfinance also postponed its annual general meeting that was scheduled to be held on September 30th stating that it was shifting headquarters from Hyderabad to Mumbai. The timing is interesting because at the AGM Akula’s nomination could have been proposed. Now the company has another three months within which it can conduct the AGM. Gujja from his end is not giving up easily and is even considering legal recourse. Other options include moving the Company Law Board (CLB). Minority stakeholders with more than a 10 per cent stake can request for a board seat, however this is not a guarantee, because the CLB has the final say in deciding on the request.
In November, 2011 Akula resigned his position as chairman. In the run-up to his resignation his firm had suffered huge losses (Rs 384 crore for the quarter ending September, 2011). This was following new regulations put in place by the Andhra Pradesh government that restricted lending and recovery of micro loans. Post that, he has been keeping a low profile, surfacing only intermittently. Since his ouster, he has been involved as director of Gujja’s company, AgSri. The company has developed an open sourced technology that helps farmers grow sugarcane with less water, less pesticides and increasing yields. Akula has also been part of a task force with the Schwab Foundation for Social Entrepreneurship to improve corporate governance in social enterprises. In addition, he has been spending time mentoring budding social entrepreneurs.
But clearly Akula’s heart is still with the company that he led to a $357 million IPO in 2010. It began in June, after SKS Trust had raised its stake to 8.79 per cent from 7.84 per cent that it had held in March 2013. Akula was nominated to the board the following month in July. After SKS Microfinance rejected the nomination stating that stakeholders have no nomination rights, SKS began increasing its stake steadily. In an effort to distance himself from any financial gain that might accrue to him if he got back into SKS Microfinance he sold his entire 0.84 per cent stake Rs 12 crore to SKS Trust Advisors this month.
The effect on SKS Microfinance:
Akula’s fight to get back into SKS Microfinance comes at the time when the company is showing signs of a turnaround. For the quarter ending June 30, 2013, SKS Microfinance had a net profit of Rs 5 crore. This is a massive improvement over the loss of Rs 39 crore in the same quarter last year.
After the Andhra Pradesh fiasco, SKS Microfinance had written off loans worth Rs.1,362 crore; cut employees to 1,200 from around 7,000 and reduced branches to 120 from 550. The Akula board nomination saga is bound to distract SKS Microfinance that is currently run by its board, and management team led by M R Rao who is CEO and MD. Rao who has been with the company since 2006 and had stints at ING Vysya Life Insurance, American Express and Standard Chartered Bank in the past.