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Update: OnMobile has issued a statement denying media reports pointing towards the company’s CEO Arvind Rao being involved in misappropriation of funds and an enquiry being conducte by an external auditor for it. Here’s the statement:
“A number of news items appearing in the press have reported that the board of directors of OnMobile Global Limited has ordered a probe against the company’s promoter and CEO Arvind Rao for alleged misappropriation of funds for which an external auditor has been appointed to establish the charges against Arvind Rao which include diversion of company funds to another entity promoted by him and also that the Company has terminated the employment of Sandhya Gupta, M & A head, as part of the probe. The Company denies all such rumors and allegations, which are baseless and devoid of factual accuracy.
Arvind Rao is not being investigated by the Board for any misappropriation of funds. Arvind Rao is a VAS pioneer and has led OnMobile to much success over the years and enjoys a high professional reputation in the market. Arvind while continuing as Managing Director, spearheads the international business. To ensure that the rest of the business gets adequate focus the day to day operations of the Company are being overseen by a sub committee of the Board.
Sandhya Gupta, Head M&A resigned for purely personal reasons earlier this year. Her departure from the Company was not a result of any allegations of wrongdoing.
All appointments of external consultants by OnMobile over the past year have been pursuant to the “OnMobile 2020” strategy announced last year.The external consultants have been engaged to review, rework and strengthen the Company’s corporate governance policies, including internal control mechanisms, procurement-to-payment processes, risk management framework, succession planning etc.
OnMobile’s Board includes industry stalwarts and highly reputed professionals. We assure our stakeholders that OnMobile is a professionally managed and Board governed company, committed to following the highest standards of corporate governance to maximize stakeholder value.”
Earlier: Today, The Economic Times reported something that we’ve been hearing about on the grapevine for a while: that OnMobile Global is probing a fraud against its promoter and CEO Arvind Rao for siphoning money to a private company owned by him, and that a probe has been ordered by the board of directors.
We’re aware of two promoter owned companies – Riff Mobile and Oskar Habitat – as confirmed to us by Rao last year. In response to ET, the company has denied that Rao is being probed, but did say that an agency is reviewing its “internal control mechanisms”. MediaNama has contacted OnMobile’s spokesperson, CFO Rajesh Kunnath, for a clarification on the matter, and he said the company has refuted these allegations, and the board is meeting today to draft a response to the media reports. We’ll update when we have the response.
What we have also heard from our sources is that at a townhall meeting yesterday at OnMobile Global, the board chairman Tony Haight told employees that he is running the company, and is being assisted by co-founder and CTO Mouli Raman.
At the time of writing this report, OnMobile’s share price is down to around Rs 33.85 on the Bombay Stock Exchange, which means it has a market capitalization of Rs 399 crore.
Note that Kunnath is the companys third CFO in the seven months, and the board recently announced that Rao will look at international operations, and an operations committee will look into Indian operations.
Excerpts from our interview.
MediaNama: Why has OnMobile changed (limited) Arvind Rao’s role without having appointed a CEO for India operations? What was the urgency?
Kunnath: The company has consistently maintained in the past that international operations are expected to grow disproportionately. To ensure that the deliverables and key projects are on track, Arvind has been requested to increase his focus on international operations. It does not in any way mean that he would take his eyes off Indian operations completely. To ensure that the India business also gets adequate focus during this phase, the day to day operations will be handled by the Operations Committee.
MediaNama: Is OnMobile looking for a full time CEO and/or Managing Director for OnMobile to replace Arvind Rao?
Kunnath: Arvind continues to be the CEO and MD of the company and a key member of the board as has always been the case thus far. Basis the scale up of international operations in the coming months, the Board will decide on the need for a person to handle India centric operations.
MediaNama: Why does the Operations committee only comprise of H.H. Haight (representing an investor) and Naresh Chandra (the Chairman of the Audit Committee) and no people involved with the company’s operations?
Kunnath: As explained above, since this is an interim arrangement, the Board is of the view that a wider representation is not warranted as the second tier of management is fairly empowered to take decisions on operations.