"Leveraged stock purchase led Arvind Rao to go astray": Forbes India
Forbes India has an article on the series of events leading to the recent controversial exit of Arvind Rao, Co-founder & CEO of listed Mobile VAS firm OnMobile.
On November 23, 2010, Arvind Rao, the 53-year-old co-founder and CEO of OnMobile, bought approximately 6 lakh shares of his company from the open market, representing a little over 1 percent of the company’s total shares....At Rs 277 a share, he had to pony up nearly Rs 16.5 crore to acquire them....So he went ahead and borrowed money to buy the shares, thinking nothing of the interest it entailed or the fact that he’d need to put up nearly half his existing shareholding as collateral...OnMobile’s shares continued to fall from those levels, while Rao’s interest payments ballooned.While the "riding the tiger" parallels with Satyam are inescapable, this seems to be more of a tragic tale especially since Rao was buying up shares of his own company believing them to be undervalued.
...Motivated by OnMobile’s growth all these years, he had never paid much attention to his salary, most of which went towards the monthly rental on his sea-facing apartment in Mumbai and his BMW 7-Series, both paid directly by the company. He requested the board for a significant salary increase, arguing (rightly) that his Rs 1 crore salary was substantially below what the market would pay the CEO of a Rs 600-plus crore international company. But they would have none of it. After that, he requested a personal loan, which too they denied.
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