Why ICRA chief Naresh Takkar was sent on sudden leave

This move was triggered by a whistleblower complaint sent to Sebi against senior management interference in ensuring good ratings specifically in IL&FS and its subsidiaries.

In an unprecedented move, the board of rating agency ICRA on Monday has asked its managing director and chief executive officer Naresh Takkar to go on indefinite leave, pending an enquiry into concerns raised by the market regulator the Securities and Exchange Board of India (Sebi).

Without disclosing specific reasons, the rating agency informed the stock exchanges that its board in its meeting on Monday decided to place Takkar on leave, effective immediately, until further notice pending the completion of the examination of the concerns raised in the anonymous representation that was forwarded to the company by Sebi.

The rating agency has appointed chief financial officer Vipul Agarwal as the interim chief operating officer who will be reporting to the board.

Global rating agency Moody’s owns 51.87 per cent in ICRA.

When contacted, Takkar said he had been asked to go on leave but refused to give further details.

Sources said this move was triggered by a whistleblower complaint sent to Sebi against senior management interference in ensuring good ratings specifically in Infrastructure Leasing & Financial Services (IL&FS) and its subsidiaries.

Sebi is already probing the case and has launched adjudication proceedings against three rating agencies ICRA, Care Ratings and India Ratings in the ratings assigned to IL&FS and its group firms.

Sources in the know said a similar action was being contemplated at other rating agencies.

The market watchdog has been of the view that rating agencies should be able to pick up early signs of a crisis and issue a rating watch, followed by rating action.

Sebi is probing whether the agencies acted in an appropriate manner in issuing ratings to IL&FS group firms.

In May, Icra had said that the board had appointed external experts to look into the anonymous representation forwarded by Sebi.

The company said it had made provisions in light of these two issues.

“Based on the work done till date, the company has made provision on a prudent basis with regards to the adjudication proceedings, while, apropos the representation, no findings have yet been identified.

"The company will consider the implications, if any, in due course, upon completion of these matters,” Icra had said.

The rating agencies have been under the scanner for not downgrading the commercial papers of IL&FS Financial Services (IFIN) despite weak financials.

This rating had apparently given confidence to investors to buy debt papers of IL&FS and its subsidiaries, said a market expert.

In fact, the rating agencies had given IL&FS debentures “AAA” rating, the highest level of creditworthiness, until its subsidiary IL&FS Transportation Networks defaulted in June last year.

Photograph: Kind courtesy, Business Standard