4/7/18, 21:51 - Prabal Roy: In my opinion best analysis so
far:
Given the aura around Chanda Kochhar it is hardly
surprising that the mainline media took up the story a full two years
after a credible complaint was filed with the PMO and all other investigative
arms of the government. This controversy raises
a heady mix of issues relating to governance, leadership,
legality, morality of public icons, politics and the difficulty of institution
building in India. And a telling comment on our society at large as my
generation gradually hands over the baton to the next.
As I wrote in these columns in the context of the PNB scam,
the shocking metamorphosis of our national character over the last forty years
is at the core of our current travails. Corruption – or the willingness to
“play the system” in any form – has become a national obsession. Even those who
are not blatantly corrupt find no moral hazards with taking short cuts, bending
the intent of the established policy or doing simple “jugaad” – which
passes off, and rewarded, as our brand of “innovation”. Such is our frightening descent
into this moral morass that this line of thinking has pervaded into most levels
of society -from large businesses, government, institutions on one hand to
grassroot organisations like local bodies and residential welfare associations….
and is almost now a given in the context of existence in India.
I will not comment on the veracity of the whistleblower’s
complaint or the Indian Express report – but seemingly credible, both are
highly commendable efforts which help in restoring faith in our dwindling
democracy. However, I will question why Chanda Kochhar herself has not
addressed the multitude of questions the episode raises and has chosen to field
ICICI Bank’s non executive Chairman to effectively buy time. The fact that he
literally read out from a carefully crafted statement, couched in
legalese, and refused to take even one question at the presser does
not help matters in what is clearly a battle for her personal credibility. Or
why, unlike Nandan Nilekani as Chairman of UIDAI, she chose not to recuse
herself from the committee approving the loan to Videocon.
The questions are wide ranging. Does Venugopal Dhoot
generally enter into JVs with ordinary MBAs having no particular
known experience or skills in business or renewable energy ? I am choosing to
ignore the AMP at Harvard as an indicator of intellectual ability or Deepak’s
experience as the CEO of Pacific Capital – a company owned by his in laws. It
sounds eerily similar to DLF teaming up with Robert Vadra though that was, in all
fairness, only an investment deal and did not call for any management
experience of the partner. How did investments in debt, equity and
compulsorily convertible preference shares pour into NuPower Renewable Group
from various entities linked only to the Videocon group, and precisely at the
same percentage (10%) of the loans advanced by ICICI to the Videocon group
coincidentally after such loans were disbursed ? How, despite such large
investments by Videocon into this precious asset called Nu Power, its equity
shareholding in Nu Power reduced from 50% to 2% whereas Deepak Kochhar
increased his shareholding to 93% by pumping in only Rs. 1.89 Cr
? Valuations, as is oft repeated, is an art and not a science and it would
seem EY, the valuers in this case, are pretty adept at this art ! How did
ICICI bank advance loans to a Cayman shell entity in direct contravention of
rules ? Why was the ownership of NuPower masked multiple times through
shifting, multi layered arrangements, including trusts, but with the beneficial
ownership always remaining with Deepak Kochhar and family ? There are many more
questions in the public domain but I believe the point is made.
Despite this, the ICICI Board decided to jump into this
issue and further decided to express full confidence in Chanda
Kochhar. Whilst this would not surprise me in most companies given the
state of corporate governance, this instance is personally painful. ICICI as an
institution had benefited from the wisdom and stature of N Vahgul - its
iconic Chairman from the mid 80s and the father of Corporate Governance in
India – in its formative years. Mr Vahgul’s views on governance, women
empowerment and many other issues were way ahead of its time and left a lasting
impression on many managers, including the undersigned, whose paths crossed
with his. Chanda Kochar was one of them too who was nurtured in that
environment.
An impartial assessment of the sequence of events based on
the material in the public domain would suggest that this model of potential
nepotism falls squarely in the currently favored business model operating in
India : that of relatives and fronts profiteering from a string of amazing
coincidences by receiving massive investments in legally distinct,
structured vehicles at the same time favors are extended by those in
a position of power. Of course, being separate and legally distinct actions, it
is practically impossible to prove the quid pro quo as evident in
the Aircel-Maxis case, the 2G scam, Robert Vadra model, INX media case, Jagan
Reddy model….the list goes on. This model is favored as no conviction has
happened till date and most beneficiaries go scot free. The other two erstwhile
models, loosely termed the Lalu’s fodder scam model and Sahara’s micro investor
model, have fallen apart.
Legal arguments will be made on both sides till the cows
come home. After all, at the end of the day the defence was successful in
proving that even the 2G scam was not a scam at all ! But this
case is not a matter of legality but one of propriety and probity in
public life….that too in the banking industry whose very foundation
is solely based on trust. It is because of this that even the Supreme
Court has ruled that key personnel of private sector banks
operating with a RBI license fall within the purview of “public
servants” as defined under the Prevention of Corruption Act.
Given the current political environment and his powerful
leadership dictum on financial integrity, I do not believe PM Modi has the
luxury of choice in going slow on this matter as, like the Nirav Modi case, the
PMO was alerted on this in 2016. The entire government apparatus, including the
SFIO,ED, SEBI and CBI, have been unusually quiet on this matter even if it is
assumed that preliminary investigations have been done since 2016. Compare this
with the alacrity with which Prannoy Roy’s house and NDTV premises were raided
for almost similar allegations of round tripping.
Hindu scriptures teach us about “maya” – the illusion and
not the reality which governs us. Einstein too had famously said that
reality is merely an illusion. All leaders know that perception is the reality
which finally matters. Chanda must factor this in the equation in the interest
of the institution she manages and more importantly of which she is the face.
We do not yet know if she has erred once through this amazing string of
coincidences involving the Bank, her husband and Dhoot……..but as a true protégé
of N Vahgul she should not err now and would do well to step aside to allow
impartial investigations to determine the truth.
Any other path would not be elegant.
And Caesar’s wife still needs to be above suspicion….
The original version appeared in The BW Business World
fortnightly digital edition dated March 31, 2018 as an in depth article under
Guest Column >Article and will appear in print in the next edition
https://www.linkedin.com/feed/update/urn:li:activity:6385865853530890240
(PRABAL BASU ROY)
A Sloan Fellow from the London Business School and a
Chartered Accountant, the author presently manages a PE fund, advises start ups
and has formerly been a Director and Group CFO in various companies. He is one
of LinkedIn's Top Voices ; his views are frequently published in the
national media on the intersection of current affairs, leadership and strategy
with matters of finance, public policy, financial markets and corporate
affairs.
Join me on Twitter.com @PrabalBasuRoy and feedback
by email is welcome.
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Prabal Basu Roy
Sloan Fellow-London Business School,PE investor &
Start Up Advisor; formerly Director & Group CFO ; media commentator
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