Prashant K Sahu: In and out, in a split second

BACKSTAGE

N Subramanian, the chairman of Industrial Finance Corporation of India (IFCI), resigned moments before ten expressions of interest to acquire it were opened by the board on September 14. His stint as IFCI chairman lasted less than half-a-month.

Subramanian is an advisor to Standard Chartered which is in a consortium that has bid for at least 26 per cent in IFCI. Citing conflict of interest, he put in his papers. Subsequently, another director, Feedback Ventures Chairman Vinayak Chatterjee too quit as he has business links with Infrastructure Development Finance Company and Housing Development Finance Corporation, who are also in the race for the IFCI stake.

Subramanian's resignation caught everybody by surprise. Had he continued for a little longer, he could have seen the transfer of IFCI to safe hands. Plagued by bad loans resulting from indiscriminate lending in the past, the country's oldest government-owned financial institution has not lent a single paisa in the last three years.

After dithering over it for many years, IFCI finally got the government's nod to induct a strategic partner who could turn it around. The company has substantial investments in companies and some real estate assets on its books. It also has a licence to run a non-banking finance company. Those who have submitted EoIs for IFCI include distressed-asset experts like W L Ross.

Those connected with the sell-off say that it will be a tough nut to crack. Though all the skeletons in IFCI's cupboard are out in the open, the sharp rise in the company's share price in the last few months could throw a spanner in the works. The company's share price has moved from a low of Rs 12.5 in January to Rs 80 now, a six-fold increase.

Subramanian had joined the IFCI board as an independent director in August 2006 from the Small Industries Development Bank of India, where he was the managing director. The timing of his move was perfect. After seven turbulent years, IFCI finally managed to come out of the red in 2006-07. Though it had stopped lending three years back, it did manage to sell some assets.

During his tenure as a director, he was a part of the IFCI audit committee which was overseeing the company's financial reporting process and risk management practice.

Being the senior-most member of the IFCI, he was elevated to the post of non-executive chairman on August 4 after P S Shenoy stepped down from the post. Subramanian had the opportunity to chair only one board meeting of IFCI on September 4. In that meeting, the board had decided to appoint a due-diligence advisor to guide and advise the Board on the process of induction of the strategic investor.

Before the process could be taken to its logical conclusion, Subramanian quit. Experts say his departure will not impact the induction of a strategic partner. The fact remains, however, that Subramanian, who holds a masters degree from the Indian Institute of Management, was a key member of the IFCI team that was trying to rebuild its business model.