Shares of PTC India Financial Services Ltd fell nearly 19% in morning trade on Thursday following the resignation of three independent directors (IDs) over severe governance lapses and compliance in the State-run company, especially by its managing director (MD) and chief executive officer (CEO) Pawan Singh.
The three independent directors are Kamlesh Shivji Vikamsey, Santosh B Nayar and Thomas Mathew T. In a similarly worded letter, these directors have said, "All the independent directors, including Rakesh Kacker, whose term as ID ended on 31 December 2021, have noticed and brought to the attention of the board and management of the company various instances of serious lapses in corporate governance."
These IDs have raised four main issues, which they call serious lapses of governance and compliance by the management of PTC India Financial Services. These issues include not allowing Ratnesh, who was appointed as whole-time director by the board, to work as a director for finance and chief financial officer (CFO), non-disclosure of the forensic audit report (FAR) on loan account of NSL Nagapatnam Power and Infratech Pvt Ltd, unilateral change in terms of loans and concerns over corporate governance.
The resignation letters say, "The current MD did not allow him (Mr Ratnesh) to join and function as director for finance and CFO, although he had already joined the company vide his joining report on 29 October 2021....an opinion was taken from additional solicitor general (ASG), which mentions that joining process of Mr Ratnesh is incomplete...Regrettably, the IDs were not given the briefing note given to the ASG even after we requested that this be provided to us....the current chairman and MD apparently also did not take any steps to enable the functioning of Mr Ratnesh and subsequently seem to have taken a unilateral decision to put the joining of Mr Ratnesh on hold, without informing the board..."
On 10 January 2022, PTC India Financial Services' company secretary informed the IDs that Mr Ratnesh had re-joined NTPC Ltd on 6 December 2021. "No explanation was given as to why he re-joined NTPC and the circumstances that led to his returning to NTPC. Moreover, it was alleged that he withheld the fact that he had come from NTPC on lien...We are unfortunately not able to come to any definitive conclusion on this issue as the management has steadfastly refused to share all relevant information with the board, though repeatedly requested by all the IDs," the letters say.
The IDs also allege that the management withheld for two years a forensic audit report an FAR on the loan given to NSL Nagapatnam Power and Infratech. PTC India Financial Services has provided a term loan of Rs150 crore to NSL Nagapatnam Power to set up a coal-based project of 1320MW at Angul in Odisha. However, due to ongoing stress in the project, insolvency proceedings were initiated. Then NSL, the promoter of NSL Nagapatnam Power, made a one-time settlement (OTS) offer.
At a meeting on 17 March 2020, the business committee of PTC India Financial Services discussed the OTS by NSL and asked the management to renegotiate the OTS offer. However, a revised agenda about the NSL loan was circulated on 16 December 2020, which mentioned an FAR dated 26 November 2018 on the NSL loan account.
"The FAR was disclosed for the first time only during this second meeting of the business committee and was a cause of serious concern for the board on account of non-disclosure of the FAR for a period of more than two years. The board... constituted a committee of two IDs to look into the matter...The committee, in its report, recommended that the NSL matter should be reported to Reserve Bank of India (RBI) as suspected fraud and stressed the need to strengthen internal control mechanisms...," the letters sent by the IDs say.
There was also unilateral change in conditions of loans without prior approvals of the board. The company extended a term loan of Rs150 crore for the four-laning of Darah-Jhalwar-Teendhar section of national Highway 52 under the hybrid model. The changes were made to repayment timelines without prior approval of the board, the IDs alleged.
In the board meeting on 5 August 2021, Deepak Amitabh, previous chairman of PTC India Financial Services, highlighted several corporate governance issues. "However, all these governance issues remained unresolved and not even attempted to be addressed as of date, despite several reminders by the IDS from time to time...The lack of action on the part of the company management is alarming.." the resignation letters say.
In a regulatory filing, PTC India Financial Services says, "We are in receipt of resignations from three independent directors mentioning some reasons. We refute the allegations by the outgoing directors, which were due to our adherence to best corporate governance practices under the guidance of the promoter, regulator and government of India. The matter will be addressed at the board level, and the subsequent update will be communicated to all the stakeholders appropriately."
PTC India Financial Services ended Thursday 18.32% down at Rs20.95 on the BSE, where the 30-share Sensex closed 1.06% down at 59,646 points.