Domestic financial institutions and insurance firms must vote at the extraordinary general meetings (EGM) of the Tata group as they are answerable to their shareholders, said former GIC MD and financial services veteran U Mahesh Rao.
Rao, 78, who was also on the board of various Tata group companies for several years, said the recent abstention by LIC and other institutions at the EGM of TCS reminded one of the corporate battle between UK’s BAT and ITC.
At the recent TCS EGM, LIC, which owns little more than 3%, didn’t vote on the resolution to replace former chairman Cyrus Mistry.
Rao said although promoters Tata Sons own about 73.33% in TCS, a stance by institutions sends out a strong message.
Incidentally, shareholder advisories had advised foreign institutions to vote against replacing Mistry at group companies.
In 1995, BAT (British American Tobacco) launched a bid to take over ITC and was keen on buying out UTI’s stake in ITC at a premium.
UTI was then experiencing financial turbulence. Most financial institutions and UTI did not vote during crucial meetings, abstaining from taking a stand.
UTI later saw the collapse of its flagship scheme US 64.
“There is no purpose served in being neutral. Shareholders’ interests must be protected. The share price has already been impacted. A little bit of courage by the institutions is needed,” Rao told HT.
Tata group companies have already lost more ₹1 lakh crore in market cap ever since the dispute broke out on October 24.
The shares prices of group firms have plunged and added to the overall bleak sentiment stemming from the adverse impact of demonetisation.
Rao was ICICI’s nominee in Tata Chemicals when Darbari Seth was heading the company. He has spent close to two decades on the board of Tata Global Beverages, when it was just Tata Tea.