Meanwhile, both Subramanian and PE firm deny that they control the company.
ICICI Venture — one of the key investors in discount retailer Subhiksha — has written a letter to the Registrar of Companies (RoC) in Chennai asking for an independent auditor to be appointed to scrutinise the ailing company’s accounts.
According to government sources, ICICI Venture said the Chennai- based retailer has not presented them or the board with the 15-month audited accounts ending June 31, 2008, so they are apprehensive of the company’s financial stability and health.
Meanwhile, differences have developed between ICICI Venture and Subhiksha Managing Director R Subramanian with both denying that they control the company.
Subramanian, who holds 59 per cent in the company, insisted ICICI Venture has been controlling Subhiksha since 2004 by virtue of its right to appoint a majority of the directors.
ICICI Venture, which holds 23 per cent in the retail chain, strongly denied this. Last week, four directors resigned. They include Renuka Ramnath, ICICI Venture managing director, Rajiv Bakshi, ICICI Venture joint managing director, and independent directors Rama Bijapurkar, an independent management consultant, and Kannan Srinivasan, professor from Carnegie Mellon.
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When contacted, Subramanian said, “We are not aware of any letter written by anyone to the RoC — and since we run a transparent business we would be more than happy to answer any queries that may be raised by anyone provided the questions are raised of us. Naturally we can’t answer questions that are not asked of us.”
He added that as “an ICICI Venture-controlled company” Subhiksha has complied with all required corporate laws and governance practices so its books have always been clean. “We have been run strictly as per the agenda set for us by ICICI Venture,” he added.
Subramanian pointed out that under the takeover code of the Securities and Exchange Board of India (Sebi) and the latest policy on foreign direct investment (announced last week), the right to appoint a majority of directors in the company constitutes “control”. By those yardsticks, therefore, ICICI Venture has been in control of the company since 2004. The private equity company also had the right to appoint or remove people at senior levels as well control the audit committee and appoint statutory auditors.
Strongly refuting Subramanian’s claim, an ICICI Venture spokesperson said: “ICICI Venture holds only a 23 per cent minority stake in the retail chain. It is the sole responsibility of the managing director of the company, who is also the majority shareholder, to exercise complete control over the day-to-day affairs, including the administration and financials of the company.”
The spokesperson added that the “directors on the board including the nominees of ICICI Venture were not required to interfere and/or participate in the day-to-day affairs of the company”. The company, however, declined to comment on its letter to the ROC
In September last year, ICICI Venture sold 10 per cent of its stake to Azim Premji’s investment firm, Zash Investment, for around Rs 230 crore, after which ICICI Venture’s stake fell to 23 per cent. ICICI Prudential holds 5 per cent and employees hold the remaining 3 per cent. ICICI Venture had first invested in the company in 2000 and three more times after that.
Last month, Subhiksha approached the banks, which have collectively lent the retailer over Rs 750 crore, to restructure its debt, citing falling demand as a reason for its inability to follow original repayment schedules. According to reports it has asked for a two year moratorium on interest and principal and halveinterest rates. The company has borrowed three times its net worth to scale up operations leading to a serious financial crunch.