Indian mutual fund houses and LIC have exposure of over R20,000 cr and R35,000 cr in various Tata Group companies
Minority shareholders, including mutual funds and insurance companies, are likely to either abstain or vote in favour of Ratan Tata in the coming extraordinary general meeting (EGMs). However, there are also a few fund houses and insurance companies which are yet to decide about the voting.
Cyrus Mistry was removed as Tata Sons chairman in October on the grounds of underperformance and not having kept up with the ethos of Tata Group. While Ratan Tata was called back as interim head of conglomerate. Tata Sons, the holding company has approached shareholders of leading group firms including Tata Consultancy Services (TCS), Tata Steel, Tata Motors, Tata Chemicals, Tata Power and Indian Hotels to remove Cyrus Mistry as director from the boards. The first EGM will be that of TCS scheduled on December 13.
Indian mutual fund houses and Life Insurance Corporation of India (LIC) has exposure of over Rs 20,000 crore and Rs 35,000 crore respectively in various Tata Group companies. “We have not taken a concrete decision on the issue, but we will take as and when the EGMs takes place. However I would also like to say that, it is likely that we will vote in favour of Ratan Tata or abstain from voting,” said chief investment officer (CIO) of leading fund house on condition of anonymity.
Top fund house such as HDFC Mutual Fund and ICICI Prudential Mutual Fund among others have investments worth over Rs 4,000 crore and approximately R2,000 crore respectively in top Tata group companies as on October, 2016, says the data from Value Research. While LIC holds 13.62% in Tata Steel, 13.12% in Tata Power, 5.2% in Tata Motors and 3.21% as on September according to the data from Prime Database.
In the last week of November, Cyrus Mistry had met senior fund managers of top mutual funds and insurance companies and had urged them to protect the interest of minority shareholders of Tata group companies. “As of now we are likely to vote in favour of Ratan Tata or abstain from voting, but final decision will be taken prior to the EGMs,” said top officer of leading insurance company.
Since October 24, when Cyrus Mistry was unceremoniously removed as chairman of Tata Sons, the two sides have indulged in levelling allegations and counter allegations against each other. The Tatas have essentially said that Mistry was the chairman of the group companies only because of his position as the chairman of Tata Sons and hence should quit from each of the boards after his ouster as Tata Sons chairman. Mistry, for his part, has defended his strategies and blamed the legacy issues for the large debt overhang on the group. He has also found support from the independent directors of Tata Chemicals and Tata Motors calling his ouster an “illegality”. His fate in the boards of the Tata Group companies, however, remains in the hands of institutional shareholders, who have large stakes in several of them. LIC, for instance, has a 13.9% and 13.1% voting right in Tata Steel and Tata Power respectively.