Domestic institutional investors such as Life Insurance Corporation, GIC RE and the four public sector general insurance companies should exercise their power to cast vote at the extraordinary general meetings being convened to remove Cyrus Mistry from all the operating companies of Tata Group, said U Mahesh Rao, former Managing Director, GIC.
Incidentally, LIC, which owns four per cent in Tata Consultancy Services, is learned to have abstained from voting at the company’s EGM.
The support LIC is crucial in other listed companies as it holds a significant stake in Tata Power (13.12 per cent), Tata Steel (13.26 per cent), Tata Chemicals (8.76 per cent), and Tata Motors (5.2 per cent).
Among the Tata Group company, the cash cow TCS is the most tightly held listed company with promoters holding over 73 per cent. Foreign portfolio investors and insurance companies make up for 17 per cent and 3 per cent while public shareholders own about 3 per cent.
It is surprising that the government-owned insurance companies have not taken a stand in the resolution to remove Mistry as the outcome of this event will have severe repercussions on their investments, he said.
“They cannot afford to stay neutral as they are managing public investment and the prospects of these investments depend on the result at the EGM,” said Rao, who had been on the boards of Tata Global Beverages, Tata Chemicals, Federal Bank, JSW Steel, JK Lakshmi Cement and RIL.
The institutional investors have invested in these companies on the basis of the Tata brand and its business performance for about 150 years.
In fact, he added, the decision taken by the insurance companies can help retail investors make up their mind in crucial issues like this unprecedented corporate development.
In the TCS EGM, 57.5 per cent of the institutional shareholders who voted backed Mistry’s removal while 42.5 per cent voted against it. About 44 per cent of institutional investors abstained from voting.
In the other companies such as Indian Hotels, Tata Steel, Tata Chemicals, Tata Motors and Tata Power, the shareholding is more spread out with the promoters holding between 31 per cent and 39 per cent and rest held by public and institutional investors.
Insurance companies hold collectively hold about 20 per cent each in Tata Steel and Tata Power while it is between 10.3 per cent and 13.3 per cent in the others.
Though insurance companies decision to vote at the EGM cannot change the intention of the promoters to ease out Mistry, it is crucial to send out strong signal and enhance public confidence in these institutions, said Rao.