Moneylife Corporate Governance Award Shortlist Announced
At our 10th anniversary programme in February 2020, Moneylife announced the first-ever Corporate Governance Awards that would be based on direct nominations from active investors, rigorously processed and analysed to eliminate biases. The COVID-19 pandemic delayed our plans for a year; but now the short list for the first awards for 2021 is cleared by our jury. Before we go into details, let me start by listing the five finalists – in alphabetical order. They are: 
We received nominations for 35 companies from Moneylife readers and many top investors, analysts, fund managers, bankers, academics and researchers who themselves would have comprised a high-level jury. Every company on that list was a long-term wealth creator. 
However, good governance is not strictly correlated with wealth creation and includes other factors. Our experience this year and the nominations by real investors convince us about the need for independent awards that are not influenced by financial considerations. 
The idea of this award started with a suggestion and specific donation from a well-wisher who wants to remain anonymous; it then took on a far more meaningful life than initially envisaged. The nominations went through a rigorous qualitative and quantitative analysis by Gautam Bafna, founder and chief executive (CEO) of Wisdom Torch Consulting Solutions LLP and his team. We have outlined the analysis and selection process later in this article. 
The jury held two rounds of detailed deliberations to create a shortlist of 11 and whittle it to five in the second round, with inputs from other sources. The jury comprised R Balakrishnan (with vast experience in research, rating, investment and fund management), Prof JP Singh (from IIM Ahmedabad – retd), myself and our deputy editor Yogesh Sapkale as member-secretary. 
What Happens Next? 
We invite you, our readers and investors to send in your comments, suggestions and inputs in the next couple of weeks before the jury finalises the winner and runner-up. You can write to [email protected] with your comments before 21 December 2021.
Final Shortlist
1. KPR Mill Ltd: KPR Mills, founded by KP Ramasamy and family over 40 years ago, is a leading vertically integrated producer of cotton yarn, cotton knitted fabrics and garments with facilities at Tirupur and Coimbatore (Tamil Nadu). It also has presence in sugar, power and an automobile dealership through its subsidiaries. Mr Ramasamy’s brothers KPD Sigamani and P Nataraj are managing directors (MDs), while his son CR Anandakrishnan and son-in-law EK Sakthivel, are executive directors (EDs). It has separated the posts of chairman, MD and chief executive officer (CEO). All directors are compliant with the provision of maximum directorship. The internal auditor is reporting directly to the audit committee. Promoter directors’ remuneration as a percentage of net profit is very reasonable. The directors have over 97% attendance record of board meetings. The company puts out regular investor presentations and holds concalls. KPR has provided higher education and vocational training facilities to over 27,000 employees. Twenty-seven of KPR’s employees went on to join the Indian Administrative Service (IAS).
2. Laurus Labs Ltd: Laurus Labs was incorporated in 2005 by Dr C Satyanarayana. It has three lines of business: generics active pharmaceuticals ingredients (APIs), generics finished dosage forms (FDFs) and synthesis or ingredients. Laurus makes APIs for anti-retroviral (ARV) drugs, oncology, cardiovascular, anti-diabetics, anti-asthma, and gastroenterology. It develops and manufactures oral solid formulations, provides contract research and manufacturing services (CRAMS), and provides contract development and manufacturing (CDMO) to global pharmaceutical companies. 
Laurus has also separated role of chairman and MD. The majority of directors have excellent academic backgrounds and experience. Out of eight directors, four are independent. Internal auditors report directly to the audit committee.
Subject to shareholders’ approval, the company had provided remuneration aggregating Rs7.48 crore for FY20-21 to three EDs in excess of the approvals obtained under the Companies Act, 2013.
“Laurus spent Rs30 crore during COVID for employee welfare and protective measures. Seeded 5% of initial equity in 2005 to create Employee ESOP Trust. Also believes everyone in the company deserves equal health insurance. From the security guard to CEO, everyone gets same medical insurance at Laurus. The CFO VV Ravi Kumar also created a charitable trust”, says a nomination.
3. Natco Pharma Ltd: Incorporated in 1981, Natco Pharma (Natco) is an Indian multinational pharmaceuticals company in Hyderabad (Telangana) and founded by VC Nannapaneni. Natco makes finished dosage formulations and APIs. The company’s API portfolio is focused on oncology, central nervous system, pain management and cardiovascular medicines. Natco is highly respected by fund managers, analysts and its competitors for its business practices.
All directors have good academic backgrounds and experience. Half of them are independent directors. Independent directors, apart from one, do not have a long tenure. All directors are compliant with the provision of max directorship. Remuneration received by promoters over the past three years is less than 1% of the net profit. CSR is done through Natco Trust, where the company CMD is the managing trustee.
“Even in the difficult financial conditions, Mr Nannapaneni did not retrench any of his employees. He said that since the employees have joined the company in their faith in the company, faith cannot be destroyed. He paid salaries to all the employees whether they are skilled or semi-skilled, from the sale of his own lands. There was no single case of tax evasion of central excise duties or availing fraudulent tax credits, which are common in the industry at that point of time”, said an investor who nominated NATCO.  
4. Thejo Engineering Ltd (TEL): This is one of the smallest companies nominated for the award and the only one listed on the National Stock Exchange (NSE)’s Small and Medium Enterprises (SME) exchange. Incorporated in 1986, the Chennai-based company provides operation and maintenance (O&M) as well as installation services for conveyor belt systems. TEL, promoted by KJ Joseph and Thomas John, also designs, manufactures and supplies rubber and polyurethane products for belt cleaning, spillage control, enhanced flow of material, impact and abrasion protection, screening, and rubber and polyurethane linings. 
The company has separated role of chairman and MD. All the directors have excellent academic backgrounds and experience. Out of 11, six are IDs. All directors are compliant with the provision of maximum directorship. However, the financials of its subsidiary company were not found on the company website. 
“I was surprised to see the high standards of corporate governance, even though it is an SME company, now in the process of getting into the main board. The Independent Directors are truly independent. Over a year ago, management decided to give bonus 2:1 so that they meet the criteria to list on NSE. However, the independent directors expressed doubts about a bonus issue during the peak of pandemic and related uncertainties. Though it was bit irrational the promoters/ management decided to respect the viewpoint of the independent director at a cost.
I got to know this when I asked them why did they go back from the intention expressed in the previous annual general meeting (AGM). There many such instances. I felt this is an extraordinary company in terms of ethics, governance, compliance and respect for minority shareholders. I hold over 1% in the company. Global Bridgestone made a joint venture with Thejo in Australia only because of the high quality of the company. Employees have been given liberal ESOPs and are well paid - very happy and proud of their company. They had a professional CEO till a few months ago though the second generation has been working in all key posts reporting to the CEO”, says a top investor while nominating the company.
5. Suven Pharmaceuticals Ltd (SPL): This Hyderabad-based bio-pharmaceutical company, promoted by Venkateshwarlu Jasti specialises in new chemical entity (NCE)-based CRAMS for global life science companies. It was born out of a demerger of the CRAMS business of Suven Life Sciences Ltd and is among the top-5 suppliers of high-end intermediaries to innovators in India.
All the directors have good qualifications and experience. The company has not appointed separate persons to the post of chairman and MD. Out of seven directors, four are independent directors (IDs). All directors are compliant with the provision of maximum directorship. The internal auditors report directly to the audit committee.
“SPL firmly believes that good corporate governance practices are ingredients for the balanced development of an organisation which would not only maximise the shareholder’s value but also contribute to sustained development of the organisation. The board of directors believes in ethical values and high moral standards in achieving the highest standards of corporate governance. SPL’s board is well composed with optimum mix of independent and non-executive directors and executive directors with appropriate skill sets”, says a recommendation for Suven.
The Process
Mr Bafna of Wisdom Torch Consulting Solutions volunteered to create a common framework and evaluation template to judge the 35 companies under standard parameters. 
He created 11 major heads (some had as many as seven sub-heads), including:
- Statutory compliance 
- Board composition and functioning
- Communication with shareholders
- Shareholder-related actions
- Ownership structure
- Related-party transactions
- Extraordinary gestures
- Investor perception
Mr Bafna’s support was invaluable because he created a comprehensive but concise framework in consultation with the jury and did the grunt work of collating information on every company to complete the template. He and his team trolled through annual reports, the data on directors, board meetings attended, related-party transactions, news articles, and statutory filings. This was distilled and summarised into an easy-to-understand presentation for the jury discussions. 
This process was crucial to eliminate subjective biases, since it dispassionately covered parameters such as compliance issues, board composition and functioning, quality of disclosures in annual reports, adverse audit comments, related party transactions and more. 
These were quantified and colour coded to lend objectivity to the process. Mr Bafna’s work forms the backbone of the selection process.
Once we had the shortlist of 11, our analysts did a second search on for any regulatory action we may have missed. JN Gupta, MD of Stakeholder Empowerment Services, allowed us access to their website for details on some of the companies that the proxy advisory firm tracks. This helped us arrive at the final shortlist of five nominees, all of whom meet very exacting governance standards.
We look forward to your final feedback. 
1 year ago
All shortlisted Companys belong to South, other regions dominating corporate and media space lack quality corporate bodies,?
1 year ago
Glad to note the deserving short list founded on right principles and processes.
Meenal Mamdani
1 year ago
It is notable that all 5 companies are founded by persons from the Southern states.
Replied to Meenal Mamdani comment 1 year ago
I too find that significant.
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