Institutional EYE

Commentary on Corporate Governance Issues

One India, One Stewardship

Indian regulators - SEBI, PFRDA and IRDAI, have all mandated stewardship, and this is a welcome step. But in having each regulator requiring this, we have a fragmented stewardship. The regulators need to work together and have one stewardship code for India. Investors will welcome it. India’s experience with stewardship first began in March 2010, when SEBI asked mutual funds to have a voting policy and to start voting. Having set the ball rolling Securities and Exchange Board (SEBI) held back and did not ask its regulated entities to unreservedly embrace stewardship. IRDA did so in March 2017 as did the PFRDA in May 2018. SEBI finally chose to show-up at the high table on Christmas-eve la

Royalty payments: Too early to take your eyes off

MNCs’ payments to parent companies are legitimate, but the brand and/or know-how needs to translate into commensurate growth in sales or result in higher margins than peers. Although data for the last two years shows a comforting linkage between royalty paid and financial numbers, there are still companies where it is not so and where shareholders need to engage. This and definitional issues suggest that investors still need to remain focussed on royalty. Multi-national corporations (MNCs) based in India are charged royalty by their parent companies since these MNCs benefit from the usage of global brand and / or product technology. Of the 31 MNCs[1] covered in this study the royalty paid ag

What increased investor ownership means?

Corporate India is heading towards a future where it will not just be managements and boards, but investors as well who will drive corporate behaviour. The role of institutional investors in Indian corporate governance is evolving. Starting from being providers of capital, their role has extended. Today, as shareholders, they realize that they are more than purveyors of capital and that they, in turn, have a fiduciary responsibility to their investors to engage with their portfolio companies. Taking on this responsibility has helped outside shareholders declare, when needed, their displeasure with promoter control and management-proposed resolutions from which minority investors do not stand

2019: The Last Minute

This sixth edition of IiAS’ study on timelines of Annual General Meetings (AGMs) of NIFTY 500 companies, confirms our thesis that companies with weak performance wait till the last minute to hold their AGMs. IiAS continues to believe corporate India must be better structured to close its books, publish its annual reports and target its AGM within four months of year-end. Social scientists no longer view procrastination as a time management issue. Procrastinators are seen as being more focussed on ‘managing negative moods.’ Corporates, it seems, are not immune to this affliction; companies with weak performance wait till the last minute to hold their AGMs. Perhaps, companies hope that their s

IiAS: Dividend and buy-back study 2020

60 companies can incrementally return almost Rs. 886 billionto shareholders Cash hoarding continues to plague the Indian corporate sector. In our fifth annual study on companies that can pay more, IiAS estimates, based on FY19 financials, that 60 of the S&P BSE 500 companies can, conservatively, return Rs.886 bn of surplus cash to their shareholders; which is just about one-third of their aggregate on-balance-sheet cash on 31 March 2019. Over the years, IiAS has been rallying against cash hoarding in Indian companies and asking boards to critically reevaluate their capital allocation policy. Our consistent advocacy even led to SEBI asking the top 500[1] companies to publish a dividend distri

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