The institutions vote against the decisions of the cos supported by the EP
Last week, Paytm saw two-thirds of its institutional shareholders vote against the payments company’s decision to approve related party transactions with Paytm Bank. This came less than a month after RateGain Travel Technologies Ltd saw 68.4% of public institutions reject a proposal. In February, FSN E-Commerce Ventures Ltd or Nykaa also faced opposition from major investors, with 79.5% of public fund managers rejecting a proposed change to its bylaws. In September, Zomato faced the ire of public institutions, with 63.4% voting against a similar proposal.
However, these resolutions were approved due to the majority ownership of the promoters in the case of Nykaa and RateGain, or a large portion of the shares held by venture capital, private equity firms or other early backers. of funds.
Public institutions held 10.42% of Paytm shares; the remaining 89.58% shares are held by founder Vijay Shekhar Sharma, SoftBank and Elevation Capital, Alibaba in China and retail shareholders.
In the case of Paytm, the large equity ownership of venture capitalists allowed the resolution to pass, but not before public investors such as the Canada Pension Plan Investment Board, which held 1.57% of Paytm, expressed their disagreement.
“Related party transactions should be avoided unless they clearly benefit all shareholders. The board should disclose the name and affiliation of each party involved, the value and cost of the transaction, and the business rationale,” Norges said, explaining his rationale for voting against the resolution.
Norges Bank Investment Management, which manages $1.3 trillion in assets, has a small stake in Paytm. He held 14,083,244 shares or 0.1% at the end of December.
Grantham Mayo Van Otterloo & Co., or GMO, a Boston-based hedge fund with around $75 billion in assets under management, was another fund manager who voted against the proposal, according to disclosures by these public institutions. . “A voting result like this should be read as a red light by retail investors,” said V. Balakrishnan, former chief financial officer of Infosys Ltd and founder of Exfinity Ventures, a venture capital fund.
A Paytm spokesperson said the company is constantly engaged with all shareholders and is committed to the highest standards of corporate governance and transparency. “We hold the highest regard for all of our valued shareholders, including retail investors, non-public institutions and public institutions.”
Fund managers such as sovereign wealth funds, pension funds and asset management companies have pushed management to focus on corporate governance.
“For private equity or venture capitalists, the key is to get a good exit over the life of their mandated fund to their LPs. They are normally passive, unfocused on governance issues and don’t disrupt the basket as long as they see valuations rising,” Balakrishnan said.
Nykaa has sought shareholder approval for an amendment to the articles of association. Under the proposal, founders Falguni Nayar and Sanjay Nayar would have the power to appoint half of the directors until the promoters own a quarter of the shares.
Nykaa’s promoters held 52.56%, while private equity giant TPG Capital and Steadview Capital together held 5.8%, helping the resolution win the approval of 94% of shareholders who voted vote.
But 79.5% of public institutions, which held less than 10%, voted against the resolution. Dissenting voters included the Canada Pension Plan; Nordea Fund, which is part of the largest financial services group in the Nordic countries; Amundi, which is one of the largest asset management companies in Europe and the Australian pensions giant, EquipSuper.
A Nykaa spokesman said the resolutions are the same as those approved before the IPO by shareholders and were disclosed in the share sale documents. “These are board appointment rights only subject to approval by the NRC (Nomination and Remuneration Committee), Board and shareholders,” the spokesperson added.
“There is a disconnect between public market investors and private equity investors, as the vote shows,” said Amit Tandon, founder and managing director of proxy advisory firm Institutional Investor Advisory Services India Ltd ( IIAS). “Private equity investors and startup founders are on each other’s speed dial. There’s a warm relationship between the two, which translates to PE being much more supportive of corporate resolutions. ‘business.
Zomato, the food delivery company that went public last year, saw 63.4% of public institutions, which together owned 15.7%, vote against the decision to amend the bylaws.
“The articles of association provide for the final appointment of the founder as director of the company. This could reduce their liability,” said RBC Global Asset Management, a unit of Royal Bank of Canada.
Norges, the Canada Pension Plan Investment Board, T Rowe Price and British Columbia Investment were among other high-profile public investors who opposed the proposal, according to filings reviewed by Mint. Nonetheless, the resolution won more than 90% of shareholder approval, thanks to support from venture capitalists like Tiger Global and Sequoia, which each held 5.1% of the shares.
“The shareholder dynamic for listed unicorns is about to change,” said IiAS’ Tandon. are steadily increasing as a result of both of these factors, and that’s when companies will find they need to adhere to public market standards.”
Emails sent to Zomato and RateGain requesting comment went unanswered.
“The listing of most New Era companies has resulted in the destruction of market value, and I would suggest Sebi take a few steps in the public interest. First, new age companies should, for at least a year, show that they have a majority independent board of directors. Second, they should have separated the role of chairman and CEO with an independent chairman. Finally, if family members of the founders hold key positions, the board should provide appropriate reasoning for those roles,” Balakrishnan said.
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