Rajat Gupta takes 'leave of absence' from New Silk Route

MUMBAI: McKinsey veteran Rajat Gupta has decided to take "leave of absence" from the management of the $1.4-billion PE fund New Silk Route which he co-founded five years ago. Gupta is facing charges from the Securities Exchange Commission of the US for conspiring with his associate and hedge fund manager Raj Rajaratnam who stands accused in a sensational insider trading trial.


New Silk Route (NSR) said Gupta took voluntary decision to proceed on leave of absence till he sorts out his issues. This would also avoid any distraction and ensure NSR's continued focus on the execution of its investment strategy. The fund, which tracks investment opportunities in India and neighbouring south Asian markets, maintained that "matters involving Gupta have nothing to do with NSR or any of our portfolio firms. The allegations relate to US public markets, while the fund is focused on investing in private companies in the Indian sub-continent".

On Monday, Gupta also exited the boards of Genpact, American Airlines and Harman International just before the Rajaratnam trial commenced in a Manhattan federal court. He resigned from the board of Procter & Gamble and Goldman Sachs earlier. SEC had filed civil charges against the best known Indian face in Corporate America alleging that he passed on sensitive boardroom details of Goldman Sachs and P&G to Rajaratnam. Gupta's lawyers have refuted the charges as "baseless" and said he did not profit from any of these alleged tip-offs.

NSR had started communicating with its international investors, or limited partners (LPs), soon after charges were filed against Gupta last week. The reaction of the American and European LPs to the unfolding development is crucial, and it is not clear whether their feedback played any role in his leave of absence. TOI's query to New Silk Route's US-based PR firm in this regard did not elicit any response.

Rajaratnam was supposed to figure prominently in the establishment of NSR when it was originally planned. He The main accused in the insider trading scandal was expected to spearhead a hedge fund variant focused on the sub-continent. But the plan did not materialize. Gupta went ahead with the private equity fund in which Victor Menezes and Parag Saxena are co-founders.

Meanwhile, Gupta, 62, remains as the chairman of Hyderabad-based Indian School of Business (ISB). Pressure has been mounting on this management honcho, and a big endorser of the India investment story, to quit ISB's executive board till his name is cleared in the ongoing scandal. But the ISB board, which include some of corporate India's best known CEOs, has rallied behind the troubled man who was till recently one of the most credible faces of corporate governance globally.