Mumbai, February 14:The IL&FS controversy has taken its third casualty from the Ratings industry. In a stock exchange filing, India’s leading rating agency CARE Ratings said, its chairman SB Mainak has stepped down from his post following the capital market regulator reportedly asked for his removal.
Following a section of media reported last week quoting certain findings of the forensic report that Mainak had asked his staff to not change the ratings of the bankrupt shadow banker, Infrastructure Leasing and Financial Services (IL&FS), the Securities and Exchange Board of India (Sebi) nudged the rating agency.
Consultancy firm EY earlier this week submitted a report to Sebi, in which it recorded statements, WhatsApp messages and call recordings of CARE employees.
Mainak, a former managing director of Life Insurance Corporation, was an independent director and chairman of CARE Ratings. In December, CARE’s managing director and chief executive officer (MD & CEO) Rajesh Mokashi resigned after a whistleblower’s complaint alleged management interference in ratings of companies, including IL&FS.
The impact of Mainak’s removal from the post had its adverse impact on the stock price ofthe CARE Ratings. The stock opened marginally higher at Rs 582, which was also its intra-day high level, from its previous close of Rs 581.05, but slipped to intra-day low of Rs 525, as soon as the news of sacking its chairman and independent director Mainak hit the market through stock exchange filing.
After remaining at its intra-day low level, the counter saw some short covering, with which it recovered marginally, to close at Rs 538.70, a loss of Rs 42.35 or down by 7.29 per cent. At the National Stock Exchange (NSE), CARE Ratings counter clocked the trading volume of 7.12 lakh shares.
In August 2019, Moody’s India arm ICRA sacked its MD & CEO Naresh Takkar after whistleblower allegations.
Sebi, in December, fined CARE, ICRA and India Ratings Rs 25 lakh each for violating regulations on assigning ratings to non-convertible debentures (NCDs) of IL&FS. Sebi rarely asks companies to remove top officials but it has a lot of say when it comes to key appointments at market intermediaries such as stock exchanges, depository participants and credit rating agencies.