FIs want representation on Reliance Industries board

Mumbai, Nov 28 | Updated: Nov 29 2004, 05:34am hrs
Domestic financial institutions (FIs) are expected to discuss the crucial issue of institutional representation on the Reliance Industries Ltd (RIL) board this week.

In all, banks, FIs and insurance companies have just under 7% in RIL, with mutual funds and UTI holding another 1.8%. Specifically, Life Insurance Corporation (LIC) has a 4.44% stake, while the Administrator of the Specified Undertaking, Unit Trust of India, has 1.15%.

Speaking to FE, officials at key institutions that have debt and equity exposure in the Reliance group admitted that the Reliance boardroom feud involving the Ambani brothers was totally unexpected and had caught them off-guard. They added that they would take a common approach on the Reliance crisis, and jointly decide the future course of action.

Currently, FIs dont have a nominee on the RIL board.

Yes, representation on the RIL board is an issue. We will discuss it among ourselves and decide, the chief of a leading investment institution said on Sunday. Now that boardroom issues have come to our notice, we need to take a view on representation.

The independent directors on the RIL board are ML Bhakta (who resigned recently and was then requested by RIL chairman and managing director Mukesh Ambani to reconsider his decision), TRU Pai, YP Trivedi, DV Kapur, MP Modi and S Venkitaramanan. General Insurance Corporation (GIC) nominee U Mahesh Rao ceased to be a director with effect from June 17, 2003, when his nomination was withdrawn by GIC, the RIL FY04 annual report says.

Top officials at the government-owned investment institutions said that often the holdings were a result of secondary market operations and werent strategic in nature. Hence, the issue of seeking a representation on the board hadnt come up thus far. But now that these problems have broken out and the market is also reacting nervously, well have to look at the issue of representation seriously, the chief of one FI said.

We will sit down together by the end of the coming week, if not earlier, another one said. Reliance group stocks have taken a beating ever since the feud became public.

FI sources added that the feud between Mukesh and Anil Ambani, both managing directors, was not anticipated at all by the institutions. Generally, we have been comfortable with our exposure in RIL since it is a very well-managed company. None of us expected all this to happen, the chairman of an FI explained.

On Reliance Energy Ltd, which has also been affected by the RIL feud, with six REL directors quitting last week, the institutions will call for a detailed report from its nominees, top FI sources said. GIC is represented on the REL board by Gautam Doshi, and LIC by VR Galkar, according to the REL website. No official reason has been given as yet for the resignation of the directors, most of who are in charge of various operational areas in the company.

The nominees will give us their reports. We will go through the report of the nominees in detail and then decide what is to be done, an FI official said. Banks, institutions and insurance companies have a 21.5% stake in REL.