In TCS fight, Cyrus Mistry claims small shareholders vote, but Shapoorji Pallonji group hand seen

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New Delhi | Updated: December 15, 2016 6:47:37 AM

While on the face of it would appear that small shareholders had voted for Cyrus Mistry in large numbers at the Tata Consultancy Services (TCS) shareholders’ meeting on Tuesday, it’s possible a chunk of the votes belonged to companies of the Shapoorji Pallonji Group.

Approximately 78% of the retail votes that were cast against the resolution to vote out Mistry as director of TCS.Approximately 78% of the retail votes that were cast against the resolution to vote out Mistry as director of TCS.

While on the face of it would appear that small shareholders had voted for Cyrus Mistry in large numbers at the Tata Consultancy Services (TCS) shareholders’ meeting on Tuesday, it’s possible a chunk of the votes belonged to companies of the Shapoorji Pallonji Group, sources said.

Approximately 78% of the retail votes that were cast against the resolution to vote out Mistry as director of TCS, according to a letter written by Mistry to shareholders of TCS thanking them for their support. A total of 170.85 crore votes or 86.71% were cast in all at the extraordinary general meeting of the total number of outstanding shares of 197.04 shares of TCS.

Interestingly, the majority of institutional investors — a good 56.7% — participated in the vote and didn’t abstain as was widely expected. A bigger surprise was that 42.5% of these votes actually went in favour of Mistry.

Given how Tata Sons has significant stakes in companies such as Tata Steel (31.36%) Tata Motors (32.43%), Tata Power (33.03%), Tata Chemicals ( 30.79% ) and Indian Hotels (38.66%), even if the institutional investors do decide to support Mistry more than they have in TCS, it could be difficult for him to win.

In each of these five companies, the institutional ownership is higher than that of the promoter group. However, for Mistry to win, there needs to be an increase of more than 10% in institutional participation and, moreover, a 10% swing towards him. Besides, Mistry must pull in all the retail votes.

In Tata Steel, for instance, institutions own 40.88 crore shares, the promoters own 30.45 crore shares while retail investors own 25.74 crore shares. A 10-point increase in institutional participation (compared to the TCS voting of 56.7%) or 66.7% combined with a 10% swing in their votes in favour of Mistry would mean he would poll 14.5 crore votes from institutions. The Tatas, on the other hand, would poll 12.8 crore votes from institutions and, therefore, would have 43.27 votes. So even if Mistry pulls in every single retail vote, it would fetch him in all 40.24 crore votes.

That looks difficult even if several small shareholders rooted for Mistry at Tuesday’s EGM. In the absence of detailed data it is not clear whether the small shareholders who voted were neutral shareholders or investment arms of the Shapoorji Pallonji Group.

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