Photo: Aniruddha Chowdhury/Mint
Photo: Aniruddha Chowdhury/Mint

Crisis at IL&FS preceded by spate of top-level exits at subsidiaries

Firm's financial fragility may be the cause of the departure of several C-suite executives in past two years

Mumbai: Long before a public maelstrom of debt and stagnant projects affected the reputation of Infrastructure Leasing and Financial Services (IL&FS), it appears that many senior executives at various subsidiary companies privately understood which way the wind was blowing. Mint spoke to three people who were aware of developments at IL&FS and said that several C-suite exits at the company over the past 18-24 months were precipitated by the company’s financial fragility.

“IL&FS always had a very top-heavy managerial style," a former employee of the one of the group’s subsidiaries said. “The company depended solely on heavyweights such as Mr Ravi Parthasarathy, who became CEO of the company when it was formed in 1989 and was chairman till this July. Then there were Mr Hari Sankaran, Mr Ramesh Bawa…the second tier of management, the CEOs of individual subsidiaries were never allowed to prosper. The second line was weak, or at least the perception was that they were weak. And so this made the people at the very top even more vital."

The most high-profile among these exits was possibly that of Archana Hingorani who was executive director and CEO of IL&FS Investment Managers till she stepped down in April 2017, after a stint of eight years at the group. Ram Walase stepped down as managing director and CEO of IL&FS Financial Services, Urban Infrastructure, in April 2017, after 13 years with the group. This February, Milind Patel stepped down as joint managing director of IL&FS Financial Services, after 12 years with the group.

Murli Dhar Khattar resigned in October 2016 as managing director and CEO of IL&FS Engineering and Construction. Sunil Wadhwa left in early 2017 as managing director and CEO, IL&FS Energy Development. Avinash Bapat, chief financial officer of IL&FS Energy Development and Avinash Bagul, chief operating officer of IL&FS Financial Services, both left earlier this year.

“Whenever an organisation goes through extended periods of stress, the employees are the first to be aware of this. There’s the impact on business divisions; performance is questioned, bonuses and salary increments are cut, promotions aren’t given, business growth comes to a halt," said Anshul Lodha, director, Michael Page India, an HR consulting firm. “In times like this, the CXO level and a couple of lines below the CXO see a lot of churn."

“Sometimes, members of senior leadership in such cases want to move out before they can be held accountable for decisions that might have gone bad," a second person who did not want to be named said. “With IL&FS, we’re seeing a situation now where the headquarters in Mumbai is up for sale. Naturally, if there are investigations now, people will look at past business deals and their rationale and maybe some former executives were worried where the fingers would point to."

Mint reached out to all the executives named in the story. Ram Walase, formerly of IL&FS Financial Services, declined to comment. The other executives couldn’t be reached on the phone nor did they reply to requests on Linkedin.

A questionnaire sent to a spokesperson for IL&FS did not elicit a response till going to print.

At IL&FS’s annual shareholder meeting in Mumbai on 29 September, the board members had told attending shareholders that in a bid to cut costs, senior management had been informally asked to accept job opportunities they found outside the group. “There was no talk of retrenchment yet, but people are being encouraged to leave," an individual shareholder who was at the AGM said after the meeting.

“A large part of IL&FS’s employee base is in the mid-junior level, where people don’t have access to as much information on how bad the situation is," said an experienced HR consultant. “The early indication of trouble is when C-suite executives leave. We’ve seen this happen with IL&FS, with senior managers being more pro-active in looking for jobs, over the last year and a half," he added. “Mass retrenchment at any organization is akin to pressing the panic button. (To avoid that), we know, for instance, that at IL&FS, several managers had candid conversations with their bosses, they were asked to explore options outside."

Rituparna Chakraborty, co-founder, Teamlease Services Ltd, has a slightly differing view. She said her consulting firm has not yet seen a dramatic increase in resumes from employees as IL&FS. “Senior executives normally leverage their own professional networks when looking for jobs. From the middle management, we have not yet seen an above average increase in job seekers yet. Maybe one can anticipate this in the coming days."

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