It is now almost six months since Roopa Kudva, 51, Managing Director and CEO of CRISIL for the last seven years, startled the corporate world by announcing she would be moving on. A statement from her, released by CRISIL, gave away nothing. "Change at the top at judicious intervals is a sound governance practice and allows companies to refresh themselves," it said. It added that she was "committed to ensuring a smooth transition." It is to honour that commitment that she still remains at CRISIL - for no successor has been found yet. "Roopa Kudva continues to actively manage the affairs of CRISIL and be responsible for the performance of the company," was CRISIL's reply in response to a query from Business Today.
But there has been significant reshuffling of other portfolios. The man widely seen as Kudva's deputy, Ramraj Pai, formerly president and business head of the ratings division at CRISIL, was shifted to CRISIL Foundation a few weeks ago, a relatively less-important position which, observers maintain, puts him out of the succession race. He has been succeeded by Raman Uberoi, who until then was president (corporate affairs) and before that, Chief Operating Officer, CRISIL. Uberoi also joined the rating agency around the same time Kudva did in 1992, while Pai joined three years later. But Uberoi has been away from the core ratings business for the last four years. Apart from Uberoi, the three senior-most executives - all of them possible Kudva successors - are G. Ravishankar, Head of HR; Subodh Shah, Head of Mid-corporates; and V. Srinivasan, Chief Strategy Officer and Business Head for small and medium enterprises (SMEs). Ravishankar, however, has no business experience.There have also been senior-level resignations. Arun Panicker, till recently Chief Analytical Officer, has quit, his place being taken by Pawan Agrawal. Mukesh Agarwal, President, Research, has also left. At the time of the writing, CRISIL's company secretary Neelabja Chakrabarty has also put in his papers. A new chief financial officer, Amish Mehta - who earlier worked with Castrol and Indus Tower, among others - has been hired.
An impression is growing that like Mehta, Kudva's successor, too, could be an external hire. "The succession process involves an objective evaluation of all interested candidates, internal and external," says a CRISIL spokesperson, obliquely endorsing the possibility. Indeed, global recruiting firm Egon Zehnder has been roped in for the search, though whichever names it suggests will be further screened by the board's three-member nomination committee: former Britannia head Vinita Bali, leading banking professional H.N. Sinor, both independent directors on the CRISIL board, and Douglas L. Peterson, CRISIL's Non-executive Chairman, who is also President and CEO, McGraw Hill Financial. "Kudva is working closely with the committee," the spokesperson adds.
The country's first and biggest rating agency - which today provides research and infrastructure advisory services as well - CRISIL, initially known as Credit Rating Information Services of India Ltd, began in 1987, promoted by ICICI, HDFC and other financial institutions. Its first chairman was ICICI's then chairman, N. Vaghul, while Pradip Shah was managing director. Since then, CRISIL has rated over 60,000 entities, amounting to Rs 36 lakh crore worth of debt, has a market share of over 50 per cent in bank loan ratings and the highest number of outstanding SME ratings. In 2014, it had a turnover of Rs 1,254 crore with a net profit of Rs 268 crore. Global rating agency Standard & Poor's (S&P), owned by McGraw Hill Financial, acquired a minority stake in CRISIL in 1997, going on to become majority shareholder in 2005. It now holds 67 per cent stake.
Neither of the two earlier transitions at the top at CRISIL had created the kind of vacuum Kudva's decision seems to have. "When Pradip Shah was on the verge of leaving in 1994, the company was in shock," say Hemant Gorur and Sumit Chowdhury in their book Doing What Is Right: the CRISIL Story. "It was not something the employees of India's first rating company expected or wanted. It was not easy to find a man who could fill the dynamic entrepreneur's shoes." (Shah left to start his own private equity firm, Ind Asia Private Advisors.) But in fact, no crisis arose, as ICICI banker R. Ravimohan was chosen and stepped decisively into Shah's place.
Ravimohan's own departure in 2007 was positively smooth. "It was a foregone conclusion based on the transition game plan and Kudva's performance in handling the rating business, that she would succeed Ravimohan," say Gorur and Chowdhury. Kudva was then executive director and chief rating officer. "Besides, Ravimohan had managed the expectations of his senior leadership such that the entire leadership change transpired without the friction that normally accompanies a change of guard at the top," they add. It is another matter that Ravimohan himself is said to have been unhappy about the change - allegedly sought by S&P - even though he was elevated as managing director and region head (South Asia) of S&P. He went on to join Reliance Industries.
Why really is Kudva leaving and why is the transition taking so long? Officials at both CRISIL and S&P were totally tight-lipped. But BT, speaking to those in the know - especially former CRISIL employees, has gleaned that S&P may well have had a role to play, and that Kudva too, like Ravimohan, was offered a regional position at S&P, which she declined. They also claim that the appointment of Neeraj Sahai, formerly with Citi, as president, S&P, in January 2014, could have had something to do with Kudva's decision. Sahai replaced Peterson, who was promoted to McGraw Hill Financial. Interestingly, Peterson has heaped praise on Kudva following her decision to leave, noting that during her tenure "the market capitalisation of CRISIL rose from Rs 2,900 crore to Rs 14,000 crore".Insiders also claim there is no ready successor because none has been groomed. Under Kudva, the post of executive director remained vacant, with a president heading each separate business. Two senior people who could have been groomed were Uberoi, now the ratings head, and G.V. Mani, who quit in 2011.
Kudva, however, kept shifting both around: Uberoi, for instance, was sent from ratings to operations, then made COO, then assigned corporate affairs, which essentially meant liaising. "There was no initiative to build domain expertise," says one of the insiders. "Frequent changes created an atmosphere of uncertainty." If new leaders emerged at all, they were Pai and Panicker.
Kudva also sought to infuse fresh talent with senior lateral hires, but none of them lasted. Sachin Nigam, who came from HSBC in September 2011 to head the SME business, quit a year ago. M. Ramsekhar, an ex-GVK Power and Infrastructure employee, who began his career in the Indian Administrative Service before moving to the private sector, joined CRISIL's risk and infrastructure business as CEO in January 2011, only to leave in a year and a half. So too Sanjeev Sinha stayed only two years as president (global research and analytics) at CRISIL.
The CRISIL board, too, cannot shrug off responsibility, experts say. There are only three listed rating companies in India - CRISIL, Care Ratings and ICRA. While the other two have two company executives on the board - Care Ratings has CEO R. Dogra and Deputy Managing Director Rajesh Mokashi; ICRA has P.K. Choudhury (who recently retired as chairman) and Naresh Thakkar, the current CEO - CRISIL had only one: Kudva herself. Thus other senior members of CRISIL have no board experience at all.
One of the key criteria on which CRISIL rates companies is whether it has a succession plan in place at the senior-most levels. It is ironical that CRISIL itself has been found wanting on this score. "Appointing a CEO is one of the most important decisions a board takes," says Amit Tandon, former head of Fitch Ratings, who now runs Institutional Investors Advisory Services.
"Yet there are few companies in India with a succession process to appoint the next CEO." The delay in appointing Kudva's successor is telling on CRISIL's share price. At around Rs 2,120, CRISIL's stock is almost at the same level now as it was last September when Kudva made her announcement. In comparison, the Bombay Stock Exchange's benchmark Sensex has risen 10 per cent since then.
Kudva's sudden exit has been as dramatic as her entry. The story goes that she barged into then MD Pradeep Shah's Mumbai office, not even carrying her resume and asked bluntly: "Would you be interested in hiring me?" In 20 minutes, despite the missing resume, Shah took the decision that would prove crucial for CRISIL - he employed her.