Hyderabad: SKS Trust Advisors Pvt. Ltd, the single largest shareholder of SKS Microfinance Ltd, on Sunday said it has asked the microlender to induct founder Vikram Akula on its board.
“The SKS Trusts are the founding promoter and largest shareholder, and we would like to help the company achieve its goal of promoting financial inclusion while also enhancing long-term shareholder value,” Biksham Gujja, chairperson of the trustees of SKS Trust, wrote in a letter to SKS Microfinance, India’s only publicly traded micro-lender. “In line with this, and as an initial step, the trusts have urged the board to induct Dr. Vikram Akula, its nominee, immediately.”
SKS’s spokesman declined to comment on the development.
SKS Trust, the sole trustee of five mutual benefit trusts (MBT) whose beneficiaries are self-help group borrowers of SKS Microfinance, became the largest shareholder in SKS Microfinance on 4 September with a 12.6% shareholding.
SKS Trust is the original promoter and shareholder of SKS Microfinance. The MBTs were formed in 2003 with the objective of promoting and enhancing the social and economic welfare of groups of poor women.
Gujja said SKS Trust nominated Akula, as he has “extensive experience in microfinance and is uniquely qualified to help the company”. SKS Trust sought the appointment of Akula in the ensuing annual general meeting, which is yet to be scheduled. The move will pave the way for the re-entry of Akula, founder and former executive chairman of SKS Microfinance and once the poster boy of the microfinance sector. He was forced to step down in November 2011 amid the Andhra Pradesh microfinance crisis, when the state brought in a law after complaints that micro-lenders were adopting coercive loan recovery practices and charging exorbitant interest rates.
The law hit the operations of the institutions giving out tiny loans to the poor in the southern state, which accounted for more than 25% of the national total at that time, pushing collection rates to 5-10%. SKS Microfinance was badly affected as Andhra Pradesh accounted for one-third of its portfolio.
SKS has written off loans totalling Rs.1,362 crore and pared its staff in the state to 1,200 from around 7,000 before the crisis.
“I am truly honoured that the trusts have asked me to serve on the board of SKS Microfinance,” Akula said in a statement. “I will do my best to help SKS Microfinance achieve its mission and to contribute to enhancing long-term shareholder value.”
SKS has got an extension of three months from the ministry of corporate affairs to hold its annual general meeting. SKS had requested the ministry for a postponement of the AGM, which was required to be held before 30 September, by three months on grounds of shifting of its registered office to Maharashtra from Andhra Pradesh. “I don’t think they (SKS Trust) will have enough weight to force the (SKS) board to do something, ” said Shadab Rizvi, an analyst tracking microfinance at the investment banking division of Mumbai-based securities house Darashaw and Co. Pvt. Ltd.
With Akula representing SKS Trust, “they could act as a pressure group within SKS to see that the philosophy of SKS, which is derived from SKS Trust, remains intact,” Rizvi said.