Mutiny at IDFC

30 March 2004

Three years ago when Nasser Munjee, managing director and chief executive, Infrastructure Development Finance Company (IDFC), told domain-b that he would like to retire in two or three years, he certainly couldn't have dreamt that he would be compelled to resign on a matter of principle.

In mid-March, Munjee along with four of his lieutenants — A K T Chari, chief operations officer, Dr. Urjit R Patel, chief policy officer, L K Narayan, chief risk officer and Luis Miranda, CEO, IDFC — decided to call it quits.

The reason? The government, a 20-per cent shareholder in the Rs.1,000 crore equity and a major lender (Rs.300 crore subordinated debt), purportedly unhappy with IDFC's performance voiced its decision to merge it with State Bank of India (SBI) which currently holds a six per cent stake in the beleaguered institution.

The other shareholders of IDFC are Reserve Bank of India (RBI), which holds a 15 per cent stake, Industrial Development Bank of India (IDBI) with 5 per cent, ICICI Bank with 6 per cent, HDFC and UTI with 3 per cent each, IFCI 2 per cent and nine foreign investors who hold 40 per cent.

The mutiny by the five IDFC officials is the second war of autonomy being waged by an institution in recent times. The first is being fought by the Indian Institutes of Management (IIM) with the government, which decided to reduce their tuition fees.

The point the five IDFC professional managers wanted to make was simple — do not tamper / tinker with IDFC's autonomy. If the shareholders are unhappy with its performance, then it is the top team that has to be removed.