Adidas chief executive officer Herbert Hainer would be visitingIndia to take stock of the crisis surrounding the local unit of the German sportswear maker, Reebok India. The unit is embroiled in a controversy, following the exit of its senior management, including Adidas India MD Subhinder Singh Prem, amid allegations of commercial irregularities.
Prem has however, denied the allegations and in turn sued his former employer for Rs 15 crores in damages. Last week, Adidas admitted to commercial irregularities at Reebok India, saying it could result in a pre-tax impact of up to euro 125 million (or Rs 871 crores), while further restructuring there could cost up to euro 70 million (Rs 488 crores) in 2012. It said it would cut the number of its nearly 1,000 Reebok stores in India by about a third.
Hainer is expected to visit senior ministers, following the survey of Reebok India’s accounts by tax authorities. According to the legal notice, Prem alleges that under Section 284 of the Companies Act, a director has to be given a show-cause notice for his removal and should be given the right to defend himself in the board before a final decision is taken. Prem said this procedure was not followed in his case. He has also demanded Rs 7.7 crore as his entitlement, including bonuses, gratuity, provident fund and severance bonus. He has also demanded another Rs 5 crore as compensation for the harm suffered by him personally and professionally due to the illegal purported termination and its fallout. This is over and above a defamation notice that he has also filed against Adidas for Rs 15 crore.
“The situation in India, although unfortunate, will allow us to now accelerate plans to improve a specific underperformance part of our business,” Hainer had said in a statement issued on April 30. Meanwhile the buzz that Adidas could shut down 200 Adidas stores in India over time, in addition to the Reebok outlets whose closure was announced last week, as it seeks to make local operations profitable. The option of closing stores was discussed at a global market meet in Phoenix, US, in March, a few days before Prem was sacked. While the company has declared its intention to shut down a third of Reebok stores (around 265) in India, it has not announced any plans for Adidas outlets. The company has over 650 outlets in India.