Coforge board flagged concerns over OP Bhatt before extension was rejected

The ratings, which the company says Bhatt did not disclose or discuss with the board, led to a fallout between the career banker and one of India’s fastest-growing mid-tier information technology (IT) services companies, resulting in Bhatt stepping down last week. That was followed by the resignation of DK Singh, the head of the nomination and remuneration committee.

“It’s more of an integrity and governance issue; whether you have the right facts or not. Obviously, we are not happy with what has happened. It’s caught us by absolute surprise. We’ve always held Bhatt and Singh in high regard,” said a board member who did not wish to be named.

People in the know added that the evaluation exercise applied to every member. This included questions about Chief Executive Officer (CEO) Sudhir Singh’s effectiveness. Some of the parameters, they said, to evaluate the performance of the chairman included questions about his contribution, whether he facilitated board meetings properly, if he was able to contribute effectively as the head, whether he had a good appreciation of the industry and if he understood the business in detail.

Singh, incidentally, recorded the highest possible score of 5 out of 5 for the performance of the executive director (CEO), with the rating coming from four independent directors and one executive director. The fact that Bhatt scored the lowest shows the doubts of other members about him, said one of the persons. Private equity firm Advent International, which holds about 20 per cent stake in Coforge, was not part of the evaluation process, the people confirmed. Advent International voted against Bhatt’s extension last month.

Questions remain on why Bhatt, who was also an independent director at Tata Consultancy Services (TCS), fell out of favour with the board. The people quoted above said that while he was supportive and there was no dissent on anything in the meetings he chaired, he failed to make his mark as an effective head.

Bhatt did not respond to calls. Repeated text and WhatsApp messages sent to him asking for his response to the board’s view went unanswered. 

Speaking on the condition of anonymity, some analysts said this could perhaps be traced back to Bhatt’s career trajectory of heading relatively conservative companies — such as State Bank of India (SBI) and being on TCS’ board — which are not on a tearaway growth path such as Coforge.

Coforge is looking to double its revenue to $5 billion by 2030 from about $2.4 billion now, as it looks to scale up key accounts, materialise its artificial intelligence (AI) bets, and also buy other firms to provide immediate inorganic revenue. That is an ambitious bet from a company that touched a billion dollars in cumulative revenue just three years ago, but then, it has been growing at breakneck speed since the pandemic

“He (Bhatt) may have had his reservations about the way deals were financed, or the high salaries of senior executives, or if the company was adopting a riskier approach to grow fast. This could always be a tussle between conservative and aggressive growth strategies,” said Pareekh Jain, CEO of EIIRTrend, a platform for discovering engineering trends. 

That growth strategy has the support of Advent, which became one of the largest shareholders post the acquisition of Encora for $2.35 billion last year. According to Jain, Advent would be looking at a short-term fast growth path to maximise its returns because it did not directly place its bets on the company. Advent International also did not respond to requests from Business Standard for comment.

Coforge said on Monday it had appointed executive search firm Egon Zehnder to identify two additional independent directors and a new chairman within the next few months. Interim chairperson Vivek Sharma said the search would be global, focusing on candidates with governance experience and professional expertise, though he would not be a candidate. The search will also look at the board’s independent directors among potential chairman candidates.