SKS cuts loose from Akula to rebuild brand3 min read . Updated: 05 Dec 2011, 12:13 AM IST
SKS cuts loose from Akula to rebuild brand
SKS cuts loose from Akula to rebuild brand
Mumbai: SKS Microfinance Ltd, India’s lone listed, and till recently, the biggest, microlender, seems to be on a drive to dissociate itself from founder-chairman .
Within a week of Akula leaving SKS, the company has removed his profile as well as its history from its website. Akula has quit as chairman but continues to be associated with the firm till March 2012 under an agreement with SKS to assist a smooth transition to the new leadership.
Akula founded SKS as a non-profit organization in 1997 and converted it into a non-banking financial company in 2005.
Brand experts see this as a strategy of SKS to rebuild its image quickly. “Whether you define him as the father of microfinance or not, a brand cannot be overpowered by any personality, but has to claim its value, based on factors such as trust, reliability, consistency and governance, among other virtues," said Nabankur Gupta, founder and chief executive, Nobby Brand Architects and Strategic Marketing Consultants. “When trust is compromised, the brand equity drops significantly and no individual can overshadow the impact."
“An organization is always bigger than the individual. Ultimately, the brand succeeds. It may take longer to wash out the memory. To retrieve their brand equity, they have disassociated with Akula," Gupta said.
Separate email queries sent to SKS and Akula did not elicit any response till press time.
Though the company said Akula’s exit was “voluntary", the alleged differences between the founder-chairman and the top management have played a critical role in the run of events that eventually led to the exit of Akula.
Akula, who has signed confidentiality and non-compete agreements with SKS, will be involved in a mobile banking initiative and will continue to be involved in the microlending industry “at a policy level".
Listed in August 2010, SKS shares have lost at least 93% of their value from their lifetime high of ₹ 1,490.7 recorded on 28 September 2010. Its net worth is down 34% because it wrote off loans given to borrowers in Andhra Pradesh, its largest market.
Akula’s differences with SKS began in October 2010 when the company sacked Suresh Gurumani, the former chief executive of the firm, citing no specific reason.
SKS’ plight started after India’s fifth-largest state Andhra Pradesh, home to one-fourth of India’s ₹ 20,000 crore microlending sector, promulgated a law following reports of a spate of suicides in the state due to alleged coercion by some of the microlenders to collect money from borrowers.
The law prohibited MFIs from collecting money weekly and asked them to secure government approval to give every second loan. MFIs saw their collection rates falling to 5-10% in Andhra Pradesh following this.
Akula was in favour of staging a show of strength by assembling millions of SKS borrowers in Andhra Pradesh to protest the state law but the company’s board did not approve of the idea.
The head of an Andhra Pradesh-based MFI, who did not want to be named, said removing the name of the founder from the website within a few days was not fair, especially when the firm has an agreement to continue an association with Akula till March.
“It is too early to remove the name of Akula, who is also the founder of the company, from the website. Unlike (Ramalinga) Raju of Satyam, Akula has not committed any crime in SKS," the official said. He did not want to be named. Raju was jailed after he confessed to committing India’s largest corporate fraud.
The day after Akula resigned, SKS shares surged 5%.
Santosh Desai, managing director and chief executive officer, Future Brands Ltd, said it is detrimental for any firm to give prominence to an individual than the organization even if he is the founder.
“There will be a desire to have a fresh start. You do that by doing all that is possible to bring image to the blank slate as possible. But you cannot, in reality, wish away like that," Desai said.
“It is a kind of purging exercise...when you find that the previous association was undesirable. It is a process that is common in situations like this," Desai said. “That does happen when you perceive that the previous association was unhealthy for the company."