A day after the board of SKS Microfinance abruptly terminated the 22-month appointment of Suresh Gurumani as its managing director and chief executive officer, its brass was focusing on the pressing job of assuaging the concerns of stakeholders.
“It is business as usual. There is no crisis. The stock price crashing is not a concern, as it will bounce back. There will be no change in management strategy,’’ insisted his successor at the country’s largest microlender, M R Rao.
A meeting of senior management and key field functionaries is likely in a couple of days, when founder-chairman Vikram Akula will be here.
‘We go on’
Rao told Business Standard the business strategy wouldn’t change: “Our focus will be on client acquisition, expansion of branch network.’’ SKS, whose business is lending to poor people (at rates much higher than the goverment would like) has 2,300 branches. It has added 237 so far this year.
Gurumani was appointed in December 2008; it was supposed to be a five-year term with effect from April 1 last year. At a consolidated salary of Rs 1.5 crore (raised this May to Rs 2 crore for 2010-11) and a performance bonus of Rs 15 lakh per annum, with annual increments of up to a maximum of 100 per cent. The board had the liberty to sanction more. Plus a one-time bonus of Rs 1 crore, paid in April 2009, with a Rs 4-crore life insurance cover.
SKS also allowed its financiers to interact with chief financial officer Dilli Raj today. “We do not believe it (the termination) will have any material impact on our relationship. This is an internal matter,” said S K Mitra, president, (agri and rural banking) at Axis Bank.
“We have done good business in the last quarter when our profits tripled. We are happy with the growth. We expect the new CEO to take it forward,” said a director of Sequoia Capital.
SKS’ loan portfolio had increased to Rs 4,578 crore as of June 30, as compared with Rs 4,321 crore at the time last year. Its member base, 6.78 million last year, is 7.28 million. The year-on-year growth in disbrusal has been 81 per cent.
Sequoia or other promoter-investors, in any case, cannot exit or trim their shareholding due to the mandatory Securities and Exchange Board of India (Sebi) guidelines of a lock-in for three years.
NextAnd, he promises, SKS would soon venture into housing and retail loans. On the former, an experiment is on in two pockets of Andhra’s Medak district. Rao said about 3,500 clients had borrowed for rural housing projects, an average loan size of Rs 80,000, with repayment between three and five years.
This apart, it will look to strengthen its retail loan segment, also under a pilot around Hyderabad and Delhi. The company has tied up with Metro Cash & Carry in Hyderabad to supply groceries to 3,500 kirana shops. It has a similar arrangement with Future Group in Delhi, where it serves another 700 members.
According to Rao, 800,000 SKS members have kirana shops and the effort would be to scale up the operations. “We will tie up with other wholesalers shortly,’’ he said, adding SKS was documenting the processes and would scale it up after a 12-month pilot.
