Former MD of Gujarat Ambuja tells Shobhana Subramanian that India?s equity markets haven?t been able to attract serious money because of lack of good corporate governance practices

You could call Anil Singhvi and find he?s in the middle of the forests in Kabini or somewhere in the mountains in Uttaranchal; the man doesn?t miss out on a chance to holiday with the family. In fact, it?s almost enviable the way Singhvi manages to keep the work-life balance intact. Having retired from an active corporate life a few years ago, Singhvi?s now going to live his passion running a business. I heard it has something to do with helping institutions vote on resolutions and decided to find out over lunch. When I messaged him to find out what kind of food he likes to eat, the answer was, ?simple?. I?m game for a meal of roti-subzi and so we find ourselves at Masala Kraft at the Taj Mahal in south Mumbai?s Colaba area.

The wonderful thing I?ve noticed about the former managing director of Gujarat Ambuja, in all the years that I?ve known him since 1989, is that he?s never stressed; never frowning or worried. But right now he seems happier than ever, probably because the acquisition of Enam by Axis Bank, which he facilitated, is a done deal. It doesn?t take us too long

to get the ordering out of the way; a few minutes of poring over the menu and we come up with mushroom kebabs for starters. For the main course, there?s paneer with khatta pyaz, a water chestnuts and peas curry, some raita and rotis. And mattha to drink.

The idea, says Singhvi, who?s clearly excited about his new venture, called Institutional Investor Advisory Services (IIAS), is to assist institutional investors vote on resolutions. ?MFs and others hardly explore the possibility of how they should vote on resolutions and, as a result, almost all resolutions are passed without opposition,? he says, pointing out that AGMs in this country have been reduced to a farce. What he says is by and large true; most non-promoter shareholders vote with their feet. And when they do protest, it can be too late, as was the case with Satyam; there was little point in arguing with the management once the damage had been done.

Singhvi believes large shareholders would want to outsource the study of resolutions rather than duplicate the costs. So, a six-member team has been put together, which will study resolutions across companies and then advise mutual funds, foreign institutional investors and insurance companies on how to vote. With Sebi having made it mandatory for MFs to disclose, on their websites, how they have voted at the AGMs, Singhvi feels they would be glad to get some expert help.

But the larger point that he?s trying to make is that India hasn?t really managed to attract too much serious money into the equity market; it?s more the hedge funds that are here. One reason for this, he feels is the lack of good corporate governance practices. ?We haven?t really had too many of the quality investors, like pension funds or endowment funds, because corporate governance is a major issue. We need to improve that, not for the sake of opposing companies, but to lift our lot and try and attract serious money,? he says.

The mushrooms are not quite what we expected them to be and should probably have been left whole, but the mattha is refreshing.

What IIAS, which is headed by Amit Tandon, former MD, Fitch Ratings, plans to do is approach large institutional shareholders through a subscriber?based model. It will put out research reports on companies with a focus on how they are organised in terms of corporate governance and also the basis for either supporting or opposing a resolution. ?If the fund manager wants us to be his proxy, we will become the proxy and vote according to his instructions,? says Singhvi. Of course, things will be that much easier once electronic voting is ushered in. Meanwhile, Singhvi believes a fund manager doesn?t necessarily want to be seen as opposing resolutions, fearing he might lose access to the management. But he might not mind voicing an opinion together with a dozen others jointly from the IIAS platform.

Once the team settles down, the service will be sold to HNIs also, albeit at a slightly lower cost. Over the long run, retail investors will also be allowed to access the site without a charge, as long as they are shareholders. ?So, if you don?t want the promoter to appoint his son as the managing director, you can register your protest,? says Singhvi. ?Or if he wants to buy a plane,? I add, as we chuckle at the thought of how embarrassed the Crompton Greaves management must have been when shareholders protested and the stock crashed after it announced it was going to buy an aeroplane.

The paneer is fresh and nicely spiced, though the water chestnuts with peas could have had a more distinctive taste. Singhvi?s convinced that companies will want to be seen as following good corporate governance practices since they will want to woo large shareholders without whose support share price will not move. In the process, smaller shareholders too would benefit. As it is, he believes that Sebi is favouring promoters by allowing them to acquire 5% of the company?s equity in a year through what?s called a creeping acquisition. ?The promoters are the biggest insiders, so how can they be allowed to buy shares,? questions Singhvi, who has also been vocal about the new takeover code not mandating that acquirers make a 100% open-offer once they cross the threshold of 25%.

He?s arguing for a 100% open-offer rather than the 26%, that the code stipulates. ?If a promoter can find the money to buy say 55% or 60%of the equity, he should be able to cobble together the rest and, in any case, Sebi should not be getting into the realm of whether acquisition financing is available or not,? he asserts. The other norm in the new takeover code that Singhvi finds a bit of a sham is the one that says independent

directors should come up with a recommendation on the open offer, and the fairness of the price offered by the acquirer, for the benefit of small shareholders. ?My point is, did the independent director support or oppose the transaction at the board meeting? If he endorsed the deal, then what would his view be worth? If the director dissented, that should be recorded and the reasons made public for the benefit of the shareholders.?

Meanwhile, before he wanders off into the forests or heads out to the mountains in Kashmir or Himachal Pradesh, Singhvi?s also readying to research regulations that hurt small shareholders. For instance, he believes they?re getting something of a raw deal as far as open-offer rules are concerned. That?s because, if they surrender shares, even after holding them for a year, the sale attracts a capital gains tax rather than a securities transaction tax (STT). ?What?s the difference between selling shares in the open market and surrendering them in an open offer,? asks Singhvi, who says a mechanism for collection STT needs to be put in place so that open offers too attract only STT. The other option could be to pay the tax through a challan, much like the way income tax is paid.

We decide to skip dessert and ask for some herbal tea instead, although Singhvi, who rarely strays from his daily gym and yoga schedule, can afford to indulge himself. He claims he uses the time as much to work out as to reflect on things, even sometimes work. I ask whether the meditation has thrown up any clues on where the next deal could come from. No, he says, he doesn?t know yet, though he sees consolidation in both the power and telecom spaces. But he feels it?s a pity ailing companies aren?t allowed to die, and says banks shouldn?t bail out a business unless it changes hands. Singhvi is halfway through Walter Isaacson?s biography of Steve Jobs and is quite taken up with it, by how the man achieved so much despite professional and personal setbacks. And how the Apple stock bounced back from around $85 at the end of December 2008 in the aftermath of the financial shock post-Lehman to over $425. With Singhvi?s efforts, Indian shareholders too could see such returns.