Mumbai: India’s largest and only listed microfinance institution, SKS Microfinance Ltd, has sacked its managing director and chief executive officer (CEO) Suresh Gurumani.

SKS’ board of directors met on Monday and passed a resolution to “terminate" Gurumani’s appointment and replace him with M.R. Rao, SKS’ deputy chief executive officer.

SKS has “withdrawn all powers and authorities granted to him or otherwise enjoyed by him in the company...with immediate effect," the company said in a stock exchange filing.

Reacting to the news of Gurumani’s exit, SKS share price tumbled on the Bombay Stock Exchange, losing 6% to close at 1,276 even as the benchmark Sensex gained 0.15%.

SKS raised almost 1,654 crore through an initial public offering and got listed on 16 August. Since then, the stock has appreciated 29.59%.

Gurumani, a former retail banking head at Barclays Bank Plc, had been SKS’ managing director and CEO since December 2008, and his term was to end in March 2014.

The company did not offer any explanation for Gurumani’s exit.

“We would not like to comment beyond what was notified to the stock exchanges," SKS spokesman Atul Takle said in reply to an email.

“M.R. (Rao) who used to be the chief operating officer, was appointed the deputy CEO last quarter. He has been elevated by the board to the post of CEO and MD. Additionally, Vikram (Akula) is the executive chairman now from his position of non-executive chairman," the email said.

Gurumani could not be contacted immediately as his phone was unreachable.

In a telephone interview with Bloomberg UTV channel, Akula said he wants to play a more proactive role in the company, but refused to comment on the reasons for sacking Gurumani.

Analysts who attended a conference call said the management refused to throw any more light on Gurumani’s exit, citing corporate governance issues.

“They said they cannot share more than what is in the public domain to only certain section of investors, but also added that financial irregularities are ruled out as the reason," said an analyst from a Mumbai-based brokerage, who did not want to be named.

Industry experts view Gurumani’s sacking as a result of “personality differences" between Gurumani and Akula, SKS’ founder and chairman.

“Akula’s appointment as an executive chairman in September was the first indication that Gurumani’s role in the company would diminish, though such an early exit was not expected," said a person who tracks the microfinance industry closely. He did not want to be identified.

The head of another microfinance firm said Gurumani was instrumental in building the scale achieved by SKS and his exit was surprising.

“Gurumani had the ability to feel the pulse of the people, which is important in our industry. He brought about many innovative transformations in SKS," the person said. He, too, did not want to be identified. “However, M.R. Rao is an old-timer at SKS and who joined the company even before Gurumani and knows its operations well."

Analysts say that it would be crucial to see how Gurumani’s exit affects the lender’s relationship with banks, which lend to it for forward lending.

As on 30 June, SKS had disbursed 16,670 crore in loans, to 7.3 million borrowers through 2,266 branches.

“The events have been surprising, but we are awaiting further clarity from the management on the reasons for the same. There is no clarity on who controls the crucial banking relationship and who is in charge of other operational issues like credit costs. But crucially since the new CEO is from the company, the succession is likely to be smoother," said Pramod Gubbi, director of equity sales at UK-based investment bank Execution Noble.

The industry tracker quoted first is, however, not surprised. “It was coming," he said.

Gurumani’s removal would give him the opportunity to sell shares of SKS owned by him.

According to SKS’ draft red herring prospectus (DRHP) filed with the capital markets regulator, Gurumani, along with some other key managerial personnel, had given a letter of undertaking dated 19 January consenting to not “sell, transfer, encumber or pledge the company’s equity shares" held by them to any person for three years commencing from the date of listing. But if the person ceased to be an employee of the company before that, he was free to sell the shares.

Gurumani owned 235,000 SKS shares, whose market value, based on Monday’s closing price, was around 300 crore.

Before the company’s float, Gurumani’s holding represented a 0.4% stake in the company. SKS’ exact shareholding pattern following the IPO isn’t available on the bourses yet.

As per the DRHP, Gurumani had also entered into a share purchase agreement with Tree Line Asia Master Fund (Singapore) Pte in January to sell 225,000 shares at a consideration of 14.32 crore.

The Reserve Bank of India cleared the proposal in February.

It is not known whether Gurumani had sold these shares to Tree Line ahead of the float.

Ashish Lakhanpal, an independent director on SKS’ board also resigned on Monday, to maintain a 50:50 ratio between independent and company directors on the SKS board.

The SKS spokesman said Lakhanpal—founder and managing director of India and Asean-focused private equity investment fund Kismet Capital Llc—was likely to rejoin the board after Gurumani stepped down, which could happen at an ensuing extraordinary general meeting of the company’s shareholders.

With Rao also joining the SKS board, the number of company directors would have exceeded the number of independent directors, had Lakhanpal not stepped down.