IndusInd Bank still dominates the discourse on corporate chicanery, posing sharp questions on the competency and the integrity of its board’s functioning. It is difficult to sell another topic unless it is equally saucy. There appears to be none. This is not said with any regret!
The topic dealt with in this article would be a pale comparison and, hence, those wishing to bite into something spicy may await a future write-up that scales up suitably.
The company concerned does not fit even into the top 1,000 listed entities as per the Business Standard ranking for FY23-24. The 1000th on that list has a turnover of Rs791 crore. This company is, at least, Rs50 crore adrift. Even its turnover for the just announced, FY24-25, is below that mark.
The reason that this midget company is in the crosshairs of this column is due to a filing to the stock exchanges on 16 May 2025 informing of a fine of Rs74,000 levied by the National Stock Exchange (NSE) on 17 March 2025 for a 37-day delay in appointing an independent director.
Considering the frequency of governance and audit lapses of gigantic scale, the news of a Rs74,000 penalty being picked on to construct a story may be scoffed at by anyone who has come this far to read the article.
In fact, this matter would have been brushed aside if this issue had cropped up in any other corporate, but somehow assumed significance when the entity is part of a group known for being ultra-conservative and meticulous in all the compliance matters.
TVS, being referred to as a group, is quite anachronistic after the 2021 exercise when the conglomerate was divvied up into bits to align with the different families’ interests. One such fragment created in the split is the Trichur Sundaram Santhanam and Family. The businesses in this cluster, with a combined turnover of Rs21,000 crore and employing 42,000 people, have now come to brand itself distinctly.
Its spread is vast and diverse, unmatched by any of the other families, with Sundaram Finance Ltd, its cubs in insurance and asset management, Sundaram Finance Holding Ltd, Brakes India P Ltd, Wheels India Ltd, Turbo Energy P Ltd, Axles India Ltd, Sundaram Motors, Madras Auto Service, representing a swathe of companies in financial services, auto parts, car sales and servicing.
The constitution of the board of TSSF may be relevant to understand the family dynamics controlling the group.
India Motor Parts & Accessories Limited is yet another company of the TSF group, and the one that forked out the penalty and disclosed it after a gap of two months to the public.
Interestingly, the company’s communication on the penalty matter further added that, “The matter was discussed by the board, which expressed regret over the incident. The board further advised the compliance team to exercise due care in the future.”
This passing the buck to the compliance team as the agency that failed is laughable, as the compliance team is not the one to identify the candidates for ID position. They only implement the process. The responsibility to shortlist and identify candidates to fill up the vacancies in time, is that of the NRC and the board only.
With a managing director and a deputy managing director to oversee a company of its size, IMPAL is actually top-heavy and its board cannot kick the can down the road, and make excuses for noncompliance as a lapse of its compliance team that would normally represent the company secretary and the next level staff.
Highlighting this and criticising the board’s action is not the remotest reason to write this article.
The curiosity was to see the identity of the person whose appointment happened after the 37-day delay and to check if the company is so selective in its choice of IDs that they find it not easy to get the right candidate, within the statutory time!
The brief profile of the ID candidate shared by the company is below.
The Securities and Exchange Board of India (SEBI) has thoughtfully fixed 75 years as the age limit for this position. Many companies even truncate the tenure of a sitting director when the age limit is hit. Yet, in this case, the appointment itself happens when the person has crossed the age of 75 years!
The more important aspect is that the person had served much of his career in companies that are a part of the TSF group. It is for the readers to judge the level of independence that can be reasonably expected with such a background.
One swallow doesn’t make a summer! The hypothesis on the nature of appointments as IDs needs more examples. Lo and behold! It surfaced in the same postal ballot, dated 27 September 2024.
While there is no direct material to confirm if the director is related to the promoters of IMPAL, the person is definitely a part of the larger TVS family, given the number of TVS group companies she is a director in.
Since two such cases led to a confirmation bias, the subject did look ripe for an article if more evidence was forthcoming.
The IMPAL board did not disappoint in the search, in living up to its standards!
The postal ballot held on 30 October 2023 provided robust examples. The first name on the ballot will qualify as a textbook case!
The appointee had completed an earlier stint as an ID, sometime up to the year 2019-2020! He is also listed as part of the promoter family in SFHL, which holds 20% in the company, and in Sundaram Finance Ltd.
And, the fourth, followed, forthwith!
It may come as a surprise to the readers that these appointments could pass muster even where the promoters’ holding in the company is a measly 30.71%, a figure that may be the lowest among all their companies and, most certainly, by the standards of the south-based companies, where the promoters are conservative and seek comfort in 51%! This is where the proverbial twist in the tale is!
Scrutinising the shareholding pattern earnestly, it is noticed that even such a small entity like IMPAL has a healthy institutional holding of 10.36%, distributed between domestic and FPI.
Reading the fine print throws up a single name straddling both the domestic and FPI category - Pari Washington Investment Fund, apparently, based in Mauritius.
IMPAL with its modest free float of about Rs620 crore (as on 22nd May) with its traded volume on that day of about Rs20 lakh, being a chosen target for an FPI may puzzle ordinary minds with limited exposure to the public markets!
In the public, non-institution category, one is amazed by the foresight of the founders that had coded Sundaram Finance Holdings Ltd, with a 20% holding, as public!
Having reached this far, the inquisitiveness to check the voting mood of the sole institution was unavoidable. Pari, that abstains from voting on all these resolutions, has seemingly taken a leaf out of the Puranic hero who vowed not to fight in the battle with his customary arms, but only act as a charioteer to his mortal friend!
The fortuitous arithmetic helps most special resolutions pass with a minimum of 99.99% votes in favour—the number the state first-ranker often gets in the 12th exam!
This is no fiction, and a sample is given from one of the latest postal ballot data.
The new age maths—30.71% is equal to 99.99%!
Having reached this distance without even describing the basic business of IMPAL is definitely a lapse the readers may not forgive!
As of 31 March 2025, for which the abstract account is available, on a total asset base of Rs2,505 crore, the investment in the group entities is Rs1,996 crore. In the context of TSF group, this company along with TSSF Pvt Ltd, and Sundaram Finance Holdings, substantially carry the burden of the group’s investments.
However, IMPAL avoids the shroud of a non-banking financial company (NBFC) or a core investment company (CIC) because its revenue account has a significant trading turnover. It trades in the auto components made by its related entity, Brakes India, for which it has a shareholder approval of up to Rs400 crore purchase per annum.
The rest, which may be Rs300 crore to Rs350 crore of turnover, is from other third parties. The employees on its roll of 875 persons and rent being the major expenditure head, signify that it carries out these activities through a network of warehouses.
One of the issues that family companies like IMPAL, though listed, are prone to is the way the promoters draw remuneration.
Its current C-suite personnel are the managing director and the deputy managing director. The remuneration as drawn in FY23-24 is as given below.
The the managing director (MD) has been in the current position since, at least, 1999, the earliest period for which the information is available. While he is not listed as a promoter of this company, he appears very much part of the TSS family as he is listed as a promoter in companies like Sundaram Finance.
The status of the deputy managing director (DMD) does not come out clearly from the data available. He has also been in different executive positions before elevation to the board, indicating that he has come through the ranks.
The reason to highlight this aspect is due to a peculiar inversion in the roles of the two incumbents, which has been announced on 16 May 2025, to take effect from 5 July 2025.
The DMD is being promoted to the position of MD, which is logical, as it is a natural progression. The strange decision is in the change in the designation of the current MD to that of a whole-time director (WTD).
This sounds like the retrogression of planets in birth charts!
Since an MD, by definition, is the final executive authority, will the WTD report to the MD, a junior, who was reporting to him for many years?
The announcement is noteworthy for its brevity and absence of details like the role and the reporting hierarchy. Maybe the annual general meeting (AGM) notice may carry these details while seeking the shareholders’ approval.
If the WTD is a sinecure, to ensure that some remuneration and perquisites flow to the current MD who has seen the company grow over the years and for making way for his second-in-command to move up, then, in the context of a family company, it is fully comprehensible.
It is common to distribute positions in a family company among different family members for achieving some form of parity in taking money out, legitimately. In some sense, meeting a birthright.
This newfangled experiment may not be common even among other family groups. Hope in the revised structure, the two do not become like the governor and the chief minister in some Indian states!
(Ranganathan V is a CA and CS. He has over 44 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as a senior advisor post-retirement, handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)
