Institutional EYE

Commentary on Corporate Governance Issues

Investors must rethink their equation with some promoters

Although investors have recently voted out the CEO of two banks, they have yet to take a stand on promoter CEOs in the corporate sector. Even so, there are instances where the long-term interests of the company will be better served by a leadership change. Investors have been shy in rocking the boat – they should not be. The banking sector has seen its fair share of Managing Director exits – several of these being unplanned and forced by either the regulator or the investors. The recent shareholder vote against the CEOs of two banks, although rare, is a welcome change, given how poorly these banks have been performing. At a time when investors are getting increasingly vocal, will corporate I

Debt default risks of the holdco must not sway Vedanta’s Independent Directors

The failed delisting will only result in increased pressure on Vedanta Limited’s cash flows to support group debt: it has already committed a USD 1.05 bn support to its parent company. Independent Directors, more so than ever before, need to arrest the financial support to the group, which comes at the cost of the minority shareholders’ interest. In maintaining a passive stance, the Independent Directors are failing in their fiduciary responsibilities. Image source: www.bloombergquint.com The failure of delisting puts both the promoters and the investors in a difficult spot. For the promoters, their access to cash flows to support group debt has been curtailed by the continuing need to manag

Vedanta delisting throws-up questions regarding disclosing unconfirmed bids

13 October 2020, Mumbai: Had Vedanta’s delisting gone through it would have been the largest ever in India. Given this, it is no surprise that its failure has attracted undue attention, with a large part of this is focused on unconfirmed bids. The question that remains to be answered is whether disclosing unconfirmed bids serve a purpose - do they provide guidance to the market or do they mislead the market. Are these bids put in to create a momentum or are they genuine data errors? If they are used to create a momentum, it may happen that an investor stays away from tendering their shares if they believe that the 90% threshold has been reached. But if they are misleading, these should find

Checking the box on skill diversity

In asking companies to disclose director-wise skills, regulators are compelling a skill-based evaluation of boards. These skill-based assessments should drive board composition and director (re) appointments. The current disclosures on director skills suggest that boards of Indian companies continue to resist an honest evaluation and to be held accountable. Directors may want the certain prestige associated with being a director – and more so if it is on the board of a listed company – but are happier without the attendant responsibility. And boards continue to shy away from holding up a mirror. Read our blog.

Vedanta’s delisting – discovering the right price

Source: www.gbdigest.com After having approved the delisting of Vedanta Limited from the Indian stock exchanges, the next step is for investors to arrive at the right price, through a reverse book building process. While IiAS refrains from making price recommendations, indicators suggest that the delisting price of 3.5x – 4.5x the floor price of Rs. 87.25: at the same time, shareholders will do well to remember that there is a price beyond which they risk turning away the promoters. Read our blog.

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