Shareholder activism has really arrived in India. This can be proven by the fact that there have been many instances in the current proxy season where shareholders have stood up to the management rather than be mere spectators of mismanagement in listed companies. Another positive takeaway has been that many of these not only involved individual cases of a retail shareholder but also larger funds and institutional investors voicing concerns against the boards and management and taking active steps to address them. As the month of September went by, we witnessed two cases of shareholder activism here in India. It involved three investors and two listed companies. While one of them is a foreign fund, the other two are India based investors. The cases are: IDBI Trusteeship Services and India Horizon Fund vs Religare & Florintree Advisors vs PTC India. We discuss both the cases in brief. Religare Enterprises Limited is facing two lawsuits filed by two investors in September. While one of these suits is filed by IDBI Trusteeship Services Limited in the Bombay High Court, the other is by its shareholder India Horizon Fund Limited in the New Delhi bench of NCLT. As per the suit filed in Bombay High Court, IDBI Trusteeship, on May 21, 2014, had subscribed to deben- tures of SGGD Projects Development Pvt. Ltd. worth Rs. 335 Crore. SGGD Projects is a public share- holder of Religare holding 75,01,005 equity shares constituting 4.20% of its equity share capital. These debentures were secured by four entities, three of which are public shareholders and one is a promoter of Religare, pledging 3,18,51,891 equity shares of Religare. The share pledge agreement, which involved 2,75,68,309 equity shares constituting 15.45% of the equity share capital of Religare restricted the pledgers from exercising their voting rights in respect of the pledged shares for proposals that may have adverse effect on the shares pledged with IDBI Trusteeship. The agreement further stated that if the security be- comes enforceable and voting notice is issued, IDBI Trusteeship can vote on such proposals. Subsequently, SGGD Projects and the other pledgers defaulted in making the payments. On August 8, 2017 Religare notified the stock exchanges of a postal ballot meeting seeking approval for investment of Rs. 500 Crore in Religare Capital Markets Limited (RCML), a 100% subsidiary. The explana- tory note stated that RCML is a loss-making entity and the entire investment of Rs. 500 Crore will be written off in the accounts of Religare. Fearing that this investment would result in diminution in the value of shares of Religare pledged in favour of it, IDBI Trusteeship issued notice to exercise its voting rights as provided under the share pledge agreement. Mailing Address: 369, 9th Cross, 29th Main, HSR Layout Sector 1, Bangalore 560102 Contact: (+91) 080 2258 2111 Reach us at: [email protected]Visit us at: www.ingovern.com Shareholder Activism in September I N G OVERN R ESEARCH S ERVICES Governance Watch OCTOBER 2017 Volume - 2017:10 Inside this issue: Shareholder Activism Revision in Secretarial Standards Proxy Season 2017 so far ... We are in News
13
Embed
INGOVERN RESEARCH SERVICES CTOBER Governance Watch · 2017-10-12 · Governance Watch OCTOBER 2017 Volume - 2017:10 Inside this issue: Shareholder Activism Revision in Secretarial
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Shareholder activism has really arrived in India. This can be proven by the fact that there have been many
instances in the current proxy season where shareholders have stood up to the management rather than
be mere spectators of mismanagement in listed companies. Another positive takeaway has been that many
of these not only involved individual cases of a retail shareholder but also larger funds and institutional
investors voicing concerns against the boards and management and taking active steps to address them.
As the month of September went by, we witnessed two cases of shareholder activism here in India. It
involved three investors and two listed companies. While one of them is a foreign fund, the other two are
India based investors. The cases are: IDBI Trusteeship Services and India Horizon Fund vs Religare &
Florintree Advisors vs PTC India. We discuss both the cases in brief.
Religare Enterprises Limited is facing two lawsuits filed by two investors in September. While one of
these suits is filed by IDBI Trusteeship Services Limited in the Bombay High Court, the other is by its
shareholder India Horizon Fund Limited in the New Delhi bench of NCLT.
As per the suit filed in Bombay High Court, IDBI Trusteeship, on May 21, 2014, had subscribed to deben-
tures of SGGD Projects Development Pvt. Ltd. worth Rs. 335 Crore. SGGD Projects is a public share-
holder of Religare holding 75,01,005 equity shares constituting 4.20% of its equity share capital. These
debentures were secured by four entities, three of which are public shareholders and one is a promoter of
Religare, pledging 3,18,51,891 equity shares of Religare. The share pledge agreement, which involved
2,75,68,309 equity shares constituting 15.45% of the equity share capital of Religare restricted the pledgers
from exercising their voting rights in respect of the pledged shares for proposals that may have adverse
effect on the shares pledged with IDBI Trusteeship. The agreement further stated that if the security be-
comes enforceable and voting notice is issued, IDBI Trusteeship can vote on such proposals. Subsequently,
SGGD Projects and the other pledgers defaulted in making the payments.
On August 8, 2017 Religare notified the stock exchanges of a postal ballot meeting seeking approval for
investment of Rs. 500 Crore in Religare Capital Markets Limited (RCML), a 100% subsidiary. The explana-
tory note stated that RCML is a loss-making entity and the entire investment of Rs. 500 Crore will be
written off in the accounts of Religare. Fearing that this investment would result in diminution in the value
of shares of Religare pledged in favour of it, IDBI Trusteeship issued notice to exercise its voting rights as
InGovern is India’s first independent corporate governance research and advisory firm which assists share-
holders and lenders that have financial or reputation exposure to companies. InGovern also assists compa-
nies in enhancing their corporate governance practices.
InGovern is a SEBI registered Proxy Advisory firm.
OUR SERVICES
Corporate Governance Research
• Bespoke governance research and analysis of
companies
• Annual governance evaluations of companies
through ‘Governance Radar’ proprietary
framework
• Periodic Publication of special reports on cor-
porate governance practices in India
Corporate Governance Advisory
• Advisory to companies on enhancing their CG
edifice by analyzing their existing corporate
governance practices
• Benchmarking company practices with best
practices
• Peer comparison of governance practices
• Diagnostic and Action Plan of governance prac-
tices
• Customized education and sensitization of
Board and senior management on governance
matters
Proxy Advisory
• Voting Recommendations: Helping clients take
informed voting decisions for shareholder
meetings – AGMs, EGMs, Postal Ballots and
CCMs
• ‘Corporate Governance Alert’ on interesting
company proposals
• Publication of Annual Proxy Season Report
Shareholder Activism
• Advising clients (investors and companies) on
solutions for value enhancement
• Helping companies to connect with investors on
voting decisions for shareholder meetings
• Communicating governance practices through
market leading Investor Relations initiatives and
white papers
• Advising companies on strategies, solutions and
tools to enhance investor perception and en-
hance value for all stakeholders
Disclaimer
This report is proprietary and may not be reproduced in any manner without the written permission of InGovern Research Services Pvt. Ltd. (“InGovern”).
While we have taken due care and caution in the compilation and presentation of the information and data in this report, no warranty is made as to the
completeness, accuracy or utility of this analysis.