Annual general meetings, the platform of minority shareholders to discuss views, suggestions and grievances with company management, are now in danger of becoming irrelevant or taken over by environmentalists
An institutional investor recently tweeted about the August annual general meeting (AGM) of DCM Shriram Consolidated Limited. One of the items on the agenda was: “Various shareholders desired that the company should discontinue the distribution of snack boxes at AGMs as some shareholders are indulged (sic) in the trading of these snack boxes.” There was no explanation about how this astonishing trading takes place and whether it occurs at the AGM itself—but the resolution to discontinue snacks was apparently put to vote and ‘passed unanimously’.
Even for those of us who spent years of our rookie reporting days covering AGMs of companies, the ‘trading of snack boxes’ was a new one. We are used to shareholders fighting for first row seats, berating textile companies for discontinuing discount coupons, complaining about the samosas or ice cream served, asking Ratan Tata to get married to ensure succession at Tata Sons, reciting specially composed poems in praise of management or bursting into song and demanding company visits. It was only in the middle of big takeover battles or after a significant scam that one saw some serious questions posed to the management. The most famous of these were in the 1980s which saw a series of hostile takeovers and subsequent fading of blue-chip boxwallah companies such as Gammon India, Shaw Wallace, Best & Crompton, Hindustan Dorr Oliver or Genelec. There were even more volatile AGMs of Reliance Industries and Bombay Dyeing during their famous war. And, there were serious discussions at AGMs in the 1990s as Ratan Tata systematically got rid of satraps such as Russi Modi, Ajit Kelkar and, less acrimoniously, Darbari Seth and Nani Palkhivala.
Once the non-management shareholding began to be dominated by foreign institutional investors (FIIs) in the 1990s, AGMs lost their relevance. Most important interactions and discussion shifted to analyst meets and retail investors became completely irrelevant. That is the reality even today and is reflected in the halving of India’s retail investor population over the past 25 years from 20 million in 1992.
Will serial annual general meetings, being completed in a flash, become a trend? This will only further undermine shareholders' rights to air their views
If you were to look at some milestones to mark the extraordinary irrelevance of retail investors in India today, you only need two examples.
On 20 May 1985, Dhirubhai Ambani, credited with creating an equity cult in India, held the AGM of Reliance Industries Limited (RIL) at the Cooperage football grounds in Mumbai. It was attended by 12,000 shareholders.
On 30 September 2013, Indiabulls, a group that powered on to India’s business landscape just about a decade ago, chose to hold the AGMs of six group companies in a row with just a perfunctory 15 minutes for each company—Store One Retail India Ltd, Indiabulls Wholesale Services Ltd, Indiabulls Securities Ltd, Indiabulls Power Ltd, Indiabulls Real Estate Ltd, Indiabulls Infra and Power Ltd.
The company claimed that 80% of the shareholders are common to all companies. But still, 15 minutes each would be barely enough to have statutory resolutions passed by shareholders such as appointment of directors and auditors or to ratify corporate actions. Earlier, on 8th August, the Adani group held AGMs of three companies—Adani Ports, Adani Power and Adani Infrastructure—45 minutes apart.
Newer business groups have no time for carefully crafted chairman’s speeches; forget about the oratory of chairman Nani Palkhivala who had shareholders flocking to ACC Ltd’s meetings just to hear the legendary jurist. The more established groups still continue to treat investors and AGMs with a modicum of seriousness, but nothing underlines the irrelevance of the retail shareholder more than this trend of express-AGMs for an entire group of companies.
But, hold on; another interesting new development is taking place with companies that plan large projects that adversely affect the environment. They need to gear up to face a bunch of informed activists, who are unconcerned about the quarter-on-quarter performance, but more interested in environmental damage caused by industry.
Environmentalists are now donning shareholders' clothes, to question environmental policies of companies. Greenpeace is an example of this. Do they really represent investors' interests?
While Gautam Adani may have hoped to wrap up three AGMs in quick succession on
8th August, he probably did not expect to be confronted by a savvy set of new shareholders. Greenpeace, the powerful and well-funded global NGO, which does not hesitate to take on the biggest companies in the world, had its campaigners buy shares of Adani to be able to attend the AGM and question the management on environmental policies. Adani was not the only company to find itself in a spot. In the same month, Greenpeace campaigners used the same strategy to confront chairman Dr GVK Reddy of GVK Power & Infrastructure (GVKPIL) over the company’s $10 million investment plan in Australian coal projects which were facing angry protests from environmentalists. The NGO did not limit its questions to the environment and has probably succeeded in pushing GVK on the back foot.
Then, in September, Greenpeace released a report, which challenged Coal India’s claims about its reserves and said they were fast depleting. Predictably, the Coal India chairman angrily dismissed the NGO’s claims at the AGM that happened soon after. But this new breed of shareholders isn’t going away. They have already lodged a formal complaint with the Securities & Exchange Board of India (SEBI) and have already bought shares in Coal India in anticipation of a long battle.
This is not corporate India’s first brush with Greenpeace. In 2008, Tata Steel had sued Greenpeace, seeking to prevent its campaigners from attending a Tata Steel AGM. It didn’t work and the activists succeeded in asking Ratan Tata, at the AGM, to withdraw from the eco-sensitive Dhamra port project in Orissa. Vedanta plc, the flagship company of the Anil Agarwal group, is routinely embarrassed at its AGM in London by a clutch of high-profile NGOs who also manage to rope in celebrity protestors for maximum impact.
In 2008, a high-profile campaign through emails and social media was targeted at Nestlé, asking it to stop using products that led to destruction of rainforests. Under the relentless barrage of emails and bad publicity generated by the KitKat campaign, the company made peace and agreed to change its sourcing strategy.
In the days before demat trading, companies used to make it a point to refuse to transfer shares, if the purchasers were perceived as ‘trouble-makers’ who asked uncomfortable questions at shareholder meetings. They can no longer do so now and a group of organised investors can buy just one share each to be able to attend general body meetings. If they manage to catch the management by surprise, they may even be able to swing decisions at these meetings. Unfortunately, these activists/shareholders do not represent investor interest. They are unconcerned with profits or dividends; their main interest is corporate social responsibility. Greenpeace has made a beginning by targeting Adani, GVK, Tata Steel and Coal India; if its interventions at general body meeting force management to engage with them or reconsider their policies, we may see a lot more of such action in future.
One person from Kerala enrolled and successfully received two Aadhaar numbers. This raises serious question over the de-duplication theory and practices of UIDAI
Aadhaar or the unique identification (UID) number is being enforced by the governments and the de-facto tagging institution, the Unique Identification Authority of India (UIDAI) by claiming uniqueness of the number. However, one person from Kerala has busted the myth created by UIDAI and its chairman Nandan Nilekani.
According to a report in Matrubhoomi, a Kerala-based newspaper, PV Narayanan, a resident of Panatthadi panchayat received two Aadhaar numbers: 548780623023 and 356459270677. The names on both these letters issued by UIDAI are same, with slight different photos. Narayanan probably may have registered at two places or centres. But, surprisingly, his fingerprints seem to have passed the so-called ‘robust’ de-duplication test of UIDAI. Since Aadhaar includes an iris scan, this too seems to have been missed.
As Moneylife has pointed out, both the union government and UIDAI were in such a hurry that they neglected the basic principle of pilot testing and size of sample. For over 1.2 billion UID numbers, they have used data from just 20,000 people, in pairs, as the sample and on the basis of the results, gone ahead with the UID number through the 'Aadhaar' project. (How UIDAI goofed up pilot test results to press forward with UID scheme)
The case of Narayanan also mocks the false positive identification rate (FIPR) theory of UIDAI. Earlier, speaking about the FIPR, the UIDAI had said, "We will look at the point where the FPIR (i.e. the possibility that a person is mistaken to be a different person) is 0.0025%". This means, for every 1 lakh comparisons, there would be two and a half false positives. On a large scale, it means for a population of over 120 crore, there would be 18 lakh crore false positives, or, for every single Indian resident there would be 15,000 false positives! (Click to see the calculations)
The International Biometric Group (IBG) testing also shows that performance can vary drastically within technologies-some fingerprint solutions, for example, had next to no errors during testing, while others rejected nearly 1/3rd of enrolled users. "Most interestingly, the testing shows that over time, many biometric systems are prone to incorrectly rejecting a substantial percentage of users. Verifying a user immediately after enrolment is not highly challenging to biometric systems. However, after six weeks, testing shows that some systems' error rates increase ten-fold," said the research, consulting and integration firm, which works closely with the biometric industry. The report is titled "Real-World Performance Testing".
Maybe the UIDAI and its registrar have thought the second enrolment of Narayanan from Kerala as false positive and issued another Aadhaar number. Hope the UIDAI chairman would be able to find out ‘original and true’ Narayayan from these two biometric-based Aadhaar numbers!
With RBI Governor Raghuram Rajan focusing more and more on core CPI inflation, BoA Merrill Lynch sees a 25bps hike in repo rate on 29th October
Core consumer price index (CPI) inflation, at 8.4%, remained uncomfortably high largely driven by around 10% housing inflation. With Raghuram Rajan, governor of Reserve Bank of India (RBI) focusing more and more on core CPI inflation, BoA Merrill Lynch (BoA ML) said it expects a 25 basis points (bps) repo rate hike on 29th October. The central bank is scheduled to review its monetary policy on 29th October.
September 2013 CPI inflation, at 9.8%, came in marginally higher than the expected 9.7% (see chart and table below). Vegetable price inflation, at 34.9%, contributed 210bp to CPI inflation.
Cereals price inflation, at 12.8%, added another 150bp (see table below). BoA ML said it expects CPI inflation to ease to 8.4% by March 2014 as the harvest cools down.
Core wholesale price index (WPI) inflation, which is at 2.6% in September 2013, remained in check with tight monetary policy killing pricing power (see chart and table below). The research note expects core inflation to remain benign through FY14.
Media reports suggest that onion prices are beginning to come down with fresh supplies hitting the market. At the same time, inflationary pressures from depreciation, as well as higher coal, power and diesel prices, will keep WPI inflation over 6% for now. BoA Merrill Lynch has thus hiked its March 2014 WPI inflation forecast to 6.6% from 6.2%.