PTC India Financial Ltd (PFS), which has been mired in controversies since its independent directors resigned in January 2021 citing corporate governance issues has informed the exchanges that it is on the lookout for a replacement for its current Managing Director and Chief Executive Officer Pawan Singh.
Singh has gone on leave in line with a directive from the Reserve Bank of India (RBI).
Also read: PTC Financial Services under RBI scanner as corporate governance issue lingers
"We would like to inform that pursuant to the direction of the Reserve Bank of India (RBI), the Board in its meeting held on June 20, 2023, decided that Shri Mahendra Lodha, Director (Finance) & CFO will take over the functions and responsibilities of the MD & CEO till the regular MD & CEO is appointed and Pawan Singh, the present MD & CEO, proceeded on leave," the company said.
PFS, the non-banking financial services arm of PTC India Ltd, has been under the scanner since January 19, 2022, when three of its independent directors resigned citing concerns over lapses in governance and compliance. While the company did not disclose the contents of the RBI letter, sources told Moneycontrol that the central bank has directed the company to replace the current MD and CEO.
Moneycontrol had sent a detailed query to PFS which remained unanswered. Messages sent to Singh and the Chairman of parent PTC India also did not elicit any response.
In January, Moneycontrol had exclusively reported that RBI has tightened its grip on the company’s management and its parent. In a strongly-worded letter to the management, the central bank has asked the management of PFS to answer some of the questions raised in a forensic audit. It has specifically questioned the role of CEO Pawan Singh.
In an interview to Moneycontrol just before that, Singh had said that the governance controversy is behind it and that the company is now looking to scale up business in 2023-24 after it was hurt in 2022-23 due to its inability to hold board meetings on time and take decisions.
Reacting to the news of Singh going on leave on June 21, shares of PFS declined 2 percent on BSE to Rs 21.43.
What got the ball rolling?
On January 19, 2022, Kamlesh Shivji Vikamsey, Thomas Mathew T and Santosh B Nayar resigned as independent directors of PFS on concerns over lapses in governance and compliance. They submitted similarly-worded resignation letters and other supporting documents. Following this, former bureaucrat Rakesh Kacker also resigned as an independent director at the parent company PTC India. Kacker was also an independent director at PFS until the end of December 2022.
PFS and parent PTC India both denied the allegations from the moment they came to light. The management of PFS filed an ‘Action Taken Report’ on February 8, 2022. But the Securities and Exchange Board of India (SEBI) pulled up PFS, barring the NBFC from holding a board meeting until it addressed the corporate governance issues as it was not satisfied with the action taken.
In March 2022, PFS appointed four independent directors on the basis of suggestions made by PTC, as the slots had been lying vacant for more than two months. This was done to ensure the smooth functioning of the board. Subsequently, in April 2022, PFS appointed CNK & Associates, LLP, to conduct a forensic audit of the company.
The CNK report highlighted issues with practices at PFS and raised concerns over the “possible evergreening” of certain accounts. The report also said that the company denied giving some crucial information needed for the investigation, amounting to a lack of cooperation by the management. After the report was submitted, the company sent a detailed disclosure to the stock exchanges on November 9, 2022, refuting most of the observations.
A second round of resignations followed soon after CNK submitted the report, in November-December 2022. Three more independent directors ― Jayant Purushottam Gokhale, Devendra Swaroop Saksena and Sushma Nath.
Gokhale’s scathing resignation letter stated that he took the step due to the “persistent refusal of the management to cooperate with the conduct of the forensic audit and the ultimate conclusion drawn by the management that the forensic audit report did not contain any significant findings whatsoever.”
Probe intensifies
RBI, along with the Securities and Exchange Board of India (SEBI) and the Registrar of Companies (RoC) is looking more closely into matters of corporate governance around PFS.
The company’s auditors, Lodha & Co, in their note attached to PFS’s financial result for 2022-23 said that PFS, Singh and Mishra have been sent show cause notice by RoC and SEBI, in view of allegations of lapses in corporate governance.
Incidentally, Singh was reappointed as the MD and CEO of PFS in January amid these allegations and despite proxy advisory firm Institutional Investor Advisory Services (IIAS) advising shareholders to vote against the appointment.
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