Rohan Verma’s has planned his departure from MapmyIndia to launch a new B2C venture. He will use funds from MapMyIndia (CE Infosystems, an established company) to start his new business initiative. It’s stirring controversy because it raises concerns about the equitable distribution of company resources. A step like this is potentially favouring insiders or executives over the interests of all shareholders. How? This is what we’ll learn here.
This current story is making waves in the Indian business scene. It is raising doubts on whether what Rohan Verma is doing is the right ethical practice.
For example, suppose you are playing a strategic game with friends. Each friend share an ownership of a gadget company. Now, what if one friend decides to take part of the company’s profits to start their own venture?
Doesn’t sounds a bit off, right? But consider this, if the new venture that is being started will compete with your gadget company, then?
That’s sort of this is what’s happening with CE Info Systems Ltd, known as MapmyIndia.
What’s the Buzz Than is Attracting Criticism?
Rohan Verma, the CEO of CE Infosystem, has stepped down to start his own business-to-consumer (B2C) company.
Here’s the issue – The company is investing a hefty sum of Rs.35 crore into the new venture. In return the company gets a 10% stake, while Rohan Verma will hold onto the 90% stake.
The Criticism:
#1. Shareholder Discontent
Imagine you’re in a group project where everyone gets equal points. But then, one of your group member decides to use the project’s budget to do something on their own.
That’s what some shareholders of CE Info System is feel like.
They’re worried about the fairness of this deal. Why? Because it seems to benefit Rohan Verma more than the company itself.
Ideally, the funds of the company shall be used to make the company grow (to grow CE Info Systems). But here, the funds are used for another venture where shareholders of CE Info System will not benefit.
#2. Governance Concerns
There are chatters going on about how companies should play fair. Had the company CE Info System been a privately held by Rohan Verma (100% owned), he could have used the funds the way he wanted. But CE Info Systems is listed company in the stock exchange.
When a CEO uses company money to fund a personal project, even if the company gets a share back, it raises eyebrows. People are asking if this was the best way to handle things. Legally, Rohan Verma has done any thing illegal, but what’s the question is, was it done in the interest of the shareholder’s of CE Info Systems.
Rohan Verma could also have kept the B2C business (new venture) under the wing of CE Info Systems. This way the new venture’s rewards would have been evenly shared with all shareholders.
What I Think About It?
In business, every move should ideally benefit everyone involved, especially in a company where shares are publicly traded.
When decisions like these are made, it’s crucial to think about everyone who has a stake, not just the big players.
Investing in new ventures isn’t bad, but how it’s done matters a lot.
Final Words
Will MapmyIndia’s board and future actions address these concerns effectively? Will Rohan Verma decide to use this personal money to funds the new venture?
This example (taking into account the public reaction) should work as a guide about how CEOs handle personal ventures?
I’m not sure what in store, at present what we can do is to wait and watch.
For new stock investors, the lesson is, invest in companies who leaders play fair for all stakeholders, not just for themselves.
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Have a happy investing.
