Even as we witness biggest banking fraud unfold in India’s second largest lender, amid other loan defaults and mis-governance in the listed space in India, ace investors from emerging markets champion Mark Mobius and Porinju Veliyath are betting on the corporate governance theme in the country. In a recent tweet, Porinju Veliyath said, “You can bet really big on the unprecedented improvement in ‘Corporate Governance’ in the listed space.” Giving an example of how to play the corporate governance theme, Porinju Veliyath points out to the rally in shares of Fortis Healthcare after promoters Malvinder and Shivinder Singh resigned.
The Supreme Court allowed to sell pledged shares is the best example of corporate governance, Porinju Veliyath told CNBC TV18, adding that it shows that how bad the promoters behave with investors community and country. The Serious Fraud Investigation Office (SFIO) will initiate a probe into alleged financial irregularities at Fortis Healthcare and Religare Enterprises, a senior official told PTI. Interestingly, the ace investor confirmed to CNBC TV18 that he has purchased shares in the company.
Meanwhile, emerging markets veteran Mark Mobius said announced that he will soon come out with a fund that will invest in companies which are focussed on environmental, social and governance (ESG) ideas. “We are interested in companies which have potential to improve environmental practices,” former Executive Chairman at Templeton Emerging Markets Group told CNBC TV18. “We will start fund with $100 million and grow from there,” Mark Mobius told the channel.
Interestingly, corporate governance-based issues had been plaguing listed companies in India such as Kingfisher and Reliance Communications, as pointed out by Veritas Research. “Incorporating a 50% governance discount to our approximate equity value of Rs 30 per share, we value the core business at Rs 15 per share, suggesting 77% downside from current levels,” the Canada-based Veritas Research had said in a report way back in 2012, sending the shares of the Anil Ambani-promoted company tumbling. The analysts had added the RCom “has a tendency to report high levels of other income, which is not sustainable on a long-term basis given the significant drop in its current cash balance.”
In its report of Vijay Mallya-led Kingfisher, Veritas had noted in 2011 that Kingfisher AIrlines was on the verge of bankruptcy, leading the flamboyant promoter to rubbish the report. With much happening in the corporate governance space, is it the next big theme for investors to watch out for?