Sharma requested the Board to reconsider the period of her re-appointment earlier approved for three-years.
Axis Bank chief Shikha Sharma’s term has been reduced to seven months from three years at her request. Sharma has been at the bank's helm since June 2009.
Sharma’s re-appointment as the Managing Director & CEO of the Bank was revised from June 1, 2018 up to December 31, 2018.
“Kindly note that Smt. Shikha Sharma, Managing Director & CEO of the Bank has requested the Board to reconsider the period of her re-appointment as the Managing Director & CEO of the Bank be revised from 1st June 2018 up to 31st December 2018,” Axis Bank said in a filing to the stock exchanges.
On December 8, 2017, the board of the third largest private lender had informed of its decision to re appoint Sharma as the MD & CEO, for a period of 3 years with effect from June 1, 2018, subject to requisite approvals.
The decision to reduce the term comes days after reports suggested the Reserve Bank of India had asked Axis' Board to reconsider Sharma's reappointment at the helm for the fourth term on the grounds of the bank's dwindling financial performance.
Background of Shikha Sharma’s term
Since over a year, Axis Bank has been under the investors, shareholders and regulatory ire over its dwindling financial performance and recent concerns over governance issues.
Last month, it was the Reserve Bank’s turn when it reportedly asked Axis Bank's Board to reconsider her fourth-term reappointment as the bank's CEO and Managing Director.
“The bank Board is likely to discuss this issue with the RBI and hope to meet an acceptable solution,” sources had told Moneycontrol.
Over three weeks back, Axis bank was reported to have seen two high-profile exits including Sidharth Rath, head of corporate and transaction banking, and V Srinivasan, deputy Managing Director.
In fact, there was also talk that billionaire banker Uday Kotak wanted to merge Axis Bank with Kotak Bank given its likely low valuations post rise in bad loans
RBI and Sebi stick
In the past year and a half, the bank has been penalised by RBI for under-reporting of bad loans where the banking regulator found divergences in classification of bad loans worth Rs 9,480 crore in FY16 and Rs 5,633 crore in FY17.
Starting April 1, RBI also dropped Axis Bank from bullion importers' list that can import gold and silver.
The lender also faced wrath of markets regulator Sebi which ordered Axis Bank to strengthen its systems and conduct an internal probe to fix responsibility as the initial investigation showed the leakage of price sensitive financial information was due to "inadequacy" of processes at the bank in a WhatsApp leak case relating to its quarterly results of April-June 2017.
Last year, Axis Bank had appointed Egon Zehnder as consultant to identify the next CEO, which conducted a preliminary search before the board decided on Sharma’s reappointment.
Speculations have been rife on Axis Bank’s Board was seeking a successor to Sharma but an early re-appointment announcement by the bank last year dashed the rumours of a leadership change in the bank.
In December last year, while Axis bank’s Board cleared Sharma’s fourth term in the bank for the next years, the reappointment was yet to be cleared by the Reserve Bank of India.
In a statement issued to stock exchanges, the bank said that the board forwards its recommendations to the regulator as required and added that the “process is currently in progress.”
Axis Bank under Shikha Sharma
Shikha Sharma took over as the chief of Axis Bank in June 2009 from banking veteran P.J. Nayak, despite some reservations from the outgoing chief who preferred that an internal candidate as his successor.
Sharma entered at a time when the world was reeling from the Lehman crisis and inherited a bank with heavy corporate book with a semi government institution.
Over the course of her nearly 9-year tenure, the bank has seen advances rise from Rs 81,557 crore at the end of the March 2009 quarter to Rs 4.20 lakh crore as of December 2017.
Even as her corporate book continued to be troublesome, Sharma’s strategy to expand the bank’s retail base worked very well. Her decision to acquire Enam’s investment banking business for Rs 2,067 crore paid got her accolades, despite some apprehensions on the valuations being too high.
Corporate NPAs and Shareholder returns
The bank is the seventh largest bank with a balance sheet size of Rs 6 lakh crore plus.
Its corporate loans, especially to the infrastructure sector players continued to impact the bank’s balance sheets and under her watch, its non-performing assets (NPA) ratio has swelled to over 300 percent to over Rs 25,000 crore as on December 2017.
The lender has seen its gross bad loans ratio rise to 5.28 percent as of December 2017 compared to 0.96 percent in March 2009, when Sharma took charge.
The pressure of bad loans has also dented its net profit at the end of December last year was at Rs 726 crore, against Rs 562 crore when she became the MD of the bank. The profit growth has reduced from 69.5 percent in FY 2009 to a negative (55.2) percent in 2017.
Worse, its shareholder returns of 252 percent is less than the Bankex index at 270 percent. The stock price has remained dormant over the past one year and in March alone, it tumbled by over 3 percent.