Mutual funds have significant voting power in key decisions of listed companies, but they have so far mostly acted as yes-men or acted unconcerned when proposals are put to vote
Bengaluru-based InGovern Research Services said Indian mutual funds are still largely passive and/or indifferent while voting at investee company’s shareholders meeting. According to a report by InGovern, IDFC Mutual Fund and Motilal Oswal Mutual Fund have completely abstained from voting on any resolutions put forth by their investee companies. Mutual funds voted FOR in 47.0% of the resolutions and abstained from voting in 51.5% of the resolutions.
According to InGovern, the number of instances where a mutual fund has voted against a proposal is very low. “No significant improvements are seen in voting participation by AMCs in shareholders’ meetings compared to previous two years,” mentions the report, which analysed the proxy voting patterns of Indian mutual funds as per disclosures made by the respective asset management company (AMC) for FY13.
“Out of the total 28,290 resolutions disclosed, mutual funds have voted AGAINST just 1.5% of the resolutions, whereas they have voted FOR in 47.0% of the resolutions and abstained from voting in 51.5% of the resolutions. Out of all the vote recommendation reports published for shareholder meetings between April 2012 and March 2013, InGovern recommended voting against 23% of these resolutions, whereas mutual funds have voted against just 1.5% of the resolutions put forth by investee companies and have abstained from voting in 51.5% of resolutions, ” the proxy-advisory firm said.
Out of the AMCs, which are among the top in terms of equity AUM, HDFC MF has voted over 683 resolutions of 255 investee companies. The fund house has been fairly active in its investee companies, voting against in 0.4% of the resolutions and voted FOR in 84.8% of the resolutions. Reliance MF has made a voting disclosure on 411 investee company meetings with a total of 2,395 resolutions. It has voted against in 0.7%, FOR in 96.7% and abstained from voting in 2.7% of resolutions of investee company meetings. Franklin Templeton MF has been fairly active as well, voting FOR in 89.4% of the 1,477 resolutions of the 240 companies and voted against in 9.7% of the companies. DSP BlackRock has voted FOR in 95% of the resolutions of 234 investee companies.
SBI MF has abstained from 42.9% of the resolutions and has voted FOR in 55.8% of the resolutions. UTI MF abstained from voting in nearly 95% of resolutions out of a total of 2,402 resolutions of 428 investee companies. ICICI Prudential MF too, abstained from voting in majority of the resolutions and has voted against in just 0.1% of the resolutions.
Over the past two years, mutual fund houses have started disclosing their voting policy, though, with much reluctance. The regulator made it mandatory in March 2010 for fund houses to make public their 'voting policy' and also their votes, but it took another reminder by the regulator in October 2011 for them to declare their voting details.
According to Nomura, the government’s broad strategy throws up no surprises and is mildly disappointing, given the build-up of expectations, also the measures broadly fall in the category of quick fix solutions and there is no detail on sustainably lowering the CAD
Finance Minister P Chidambaram on Monday unveiled much-anticipated proposals to narrow the FY14 current account deficit (CAD) at $70 billion or an estimated 3.7% of gross domestic product (GDP).
Speaking in the Lok Sabha, the finance minister outlined the government’s broad strategy to address balance of payments concerns. This includes steps to compress oil and gold import demand, curb on imports of non-essential items, liberalizing external commercial borrowing (ECB) norms for companies, allowing oil companies to raise additional funds via the ECB, allowing sale of quasi-sovereign bonds by state companies, and to liberalise non-resident Indian deposit schemes.
However, Nomura Financial Advisory and Securities (India) Pvt Ltd, said the government’s broad strategy throws up no surprises and is mildly disappointing, given the build-up of expectations. The measures broadly fall in the category of quick fix solutions and there is no detail on sustainably lowering the current account deficit, it added.
"While the government’s estimate of a smaller current account deficit is in line with our view, the real issue is financing the deficit. Weak domestic growth prospects suggest that portfolio equity inflows and overseas borrowings will be much lower this year. Hence, we expect net capital inflows to slow, which will make financing the current account deficit difficult. Hence, we expect balance of payment pressures to continue,' Nomura said in a note.
Amid din and uproar in the House over various issues including Telangana, the Minister said, "notifications in respect of tariff rates will be laid before Parliament in the usual course."
He said that with the fresh measures, "CAD will be contained at $70 billion, while the inflows will increase to a level that will be sufficient to finance the CAD.
"If the CAD is contained at $70 billion, it will amount to 3.7% of the GDP as against 4.8% FY13," he said in a statement.
Stressing that like the global economy, Indian economy too is facing challenges, the Minister said, "We believe that we have to do more to contain CAD, to reduce volatility in the currency market and to stabilise the rupee."