Icra Ltd on Thursday ousted its managing director and group chief executive officer (CEO) Naresh Takkar, three months after the Securities and Exchange Board of India or Sebi received a complaint alleging misconduct at the credit rating agency under Takkar.
In a late evening filing on stock exchanges, Icra said that following a board meeting on Thursday, “after due consideration and taking into account the best interests of the company and its various stakeholders" the company’s board has decided to terminate the employment of Takkar with immediate effect.
This is the first time a top official of a rating agency has been fired by the company’s board.
Sebi is currently probing an allegation against Icra in May with regards to the rating practices and methodologies the company followed during Takkar’s tenure.
“The Icra board will commence a search for a replacement," said the filing, adding that Vipul Agarwal, who was appointed as interim chief operating officer on 1 July remains responsible for the day-to-day operation of Icra until a CEO is appointed.
Takkar, who has been with Icra since 1991, was forced to go on an indefinite leave on 1 July after the rating agency reviewed an anonymous complaint against the firm, which was forwarded by markets regulator Sebi.
Icra has not yet shared the exact reasons for firing Takkar.
India’s rating agencies have been on the radar of Sebi after the Infrastructure Leasing and Financial Services (Il&FS) crisis surfaced. A fortnight after Icra’s move, on 18 July, credit rating agency Care Ratings too sent its managing director and CEO Rajesh Mokashi on an indefinite forced leave, pending completion of the examination of an anonymous complaint received by Sebi.
Despite receiving positive rating grades by credit rating agencies on loans disbursed by IL&FS, the infrastructure lender landed into a repayment crisis, which eventually plunged non-banking financial companies (NBFCs) into a liquidity crunch.
On 9 May, The Economic Times reported that Icra’s top brass was under the scanner of Sebi for alleged interference to ensure good ratings for IL&FS.
“Sebi is looking at whistle blower allegations that Icra’s top management meddled to ensure AAA rating to IL&FS. The market regulator has forwarded the whistle blower complaint to the rating agency. The board of Icra has given KPMG mandate to look into allegations," the ET report said citing unidentified people.
While announcing its earnings statement in May, Icra had said, “The company is in the process of addressing certain matters (i) related to credit rating assigned to one of its customers and its subsidiaries, regarding which adjudication proceedings have been initiated by Sebi and (ii) related to an anonymous representation that was forwarded to the company by Sebi. The board of directors has appointed external experts to assist with/ look into the aforesaid and related matters, which are currently on going…".
Grant Thornton, in its special audit report on IL&FS, flagged issues related to loans disbursed by IL&FS and rated by rating companies. In October, the board of IL&FS had mandated Grant Thornton to carry out a special audit for all high-value transactions undertaken by IL&FS and some of its group companies between April 2013 and September 2018.
The report had cited a few instances which implied that even though these rating agencies had concerns about IL&FS group’s operations, the ratings given by them were consistently positive for 6-7 years until they were finally downgraded in July 2018.
The report also said that there could be some cases of potential favours and gifts given by IL&FS to senior officials of rating agencies.
Sebi initiated legal proceedings against ICRA, CARE Ratings and India Ratings & Research since they had given IL&FS the highest rating of AAA even after ITNL, a subsidiary of IL&FS, defaulted in June 2018.