Subhiksha promoter and Managing Director (MD) R Subramaniam today stressed that private equity firm ICICI Venture was in “complete control of the company under the agreement”. Subramaniam’s statement comes close on the heels of reports that ICICI Venture, which owns 23 per cent stake in Subhiksha, has decided to withdraw its two nominee directors — Renuka Ramnathan and Rajeev Bakshi — from the board of the beleaguered retail chain.
While Renuka Ramnathan is the MD of ICICI Venture, India’s largest private equity firm, Rajeev Bakshi is her deputy in the company.
When contacted, a senior official of ICICI Venture confirmed the development on the condition of anonymity.
Insisting that he has not received any resignation from the nominee directors of ICICI Venture, Subramaniam said, “Even if they ultimately decide to resign, effective control of the company will continue to remain with ICICI Venture as complete control of the company is vested with them under the articles of Subhiksha. In fact, the company can hardly take any decision without the consent of ICICI Venture.”
Three independent directors — Kannan Srinivasan, a professor of marketing at Carnegie Mellon University’s Tepper School of Business, marketing consultant Rama Bijapurkar and former LIC Chairman S B Mathur — have already quit the Subhiksha board. Now, the resignations of ICICI Venture nominee directors will put the company in a piquant situation as its board will be left with only one director, Subramaniam himself. The minimum requirement is three directors on a company’s board.
“Indian company law imposes a lot of penal obligations on board members even for mistakes committed due to inability rather than intent to default (on payment of salaries, honouring of cheques etc). Directors’ resignations would only be related to that as they would understandably not want to get entangled in such issues,” Subramaniam said.
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According to sources in the ICICI group, the nominee directors have resigned apprehending a plethora of court cases that may be filed on account of bouncing of cheques. The recent case of Satyam, where directors were held responsible for the acts of the company, has also contributed to their fear.
ICICI Venture had originally acquired 38 per cent in Subhiksha for Rs 93 crore. Later, it sold 10 per cent to Azim Premji for Rs 230 crore and another 5 per cent to ICICI Prudential Mutual Fund for Rs 75 crore. At present, Subramaniam holds 59 per cent, ICICI Venture 23 per cent, Premji 10 per cent, ICICI Prudential Mutual Fund 5 per cent and employees 3 per cent in Subhiksha.