AGMs 2000 -- Sepulchral silence, notable disclosures

S. Vaidya Nathan

THE annual general meetings (AGMs) and restructuring-oriented meetings of shareholders in the 2000 season (held in the last month or so) were interesting.

The shareholders, even of major companies where the management word was almost sacrosanct, are asking uncomfortable questions and forcing polls on many resolutions of import.

Though the incumbent management (usually the promoter group), along with supportive investment institutions, usually gets away at the end, the season so far has been notable for interesting postures adopted by CEOs of major companies. For instance, the meeting of the Tata group.

Detailed view on acquisition: At the Tata Tea AGM, understandably, much interest was riveted on the takeover of Tetley UK, which has made Tata Tea the second largest player after Unilever. This deal carried the biggest price to date paid by an Indian company and, that too, cash.

The Tata Group chairman, Mr. Ratan Tata, and the vice-chairman and managing director, Mr. R. K. Krishnakumar, explained in detail the benefits they thought would flow from the deal. Using Tetley as a vehicle for export of packet teas to the global market; leveraging the Tetley brand and network to export other products; the need for a three-to-four-year period to reap benefits; and the structuring of the deal to reduce financial burden on Tata Tea... were some of the significant aspects presented to the shareholders.

There could have been room for more tangible disclosures on the matter. But the fact that the Tata Tea top management deemed it necessary to brief shareholders in some detail on the move was a step in the right direction. This was in sharp contrast to the BSES AGM.

Comprehensive, yet silent: The company, whose ownership is widely held and which had no identified promoter till about a month back, was the subject of an open offer and takeover by the Reliance group. And, at a low price too. With the open offer going through, the Reliance group now has around 26 per cent and has anointed itself the promoter of BSES in a communication to SEBI.

A major change in control, one would not have erred in presuming that the pros and cons of the matter would be discussed by the chairman. But a scrutiny of the speech delivered by the BSES chairman, Mr. R. V. Shahi, reveals a sepulchral silence on the issue.

This was in keeping with the inactivity of the BSES board, which saw the Reliance group in the saddle at a price detrimental to BSES shareholders. The speech had laid out, in detail, the business position of BSES, its plans to leverage its power distribution network in the communication domain and prospects in this line of business.

But not a word from the BSES chairman on the fact that the equity ownership pattern had changed and that the company was now de jure in new promoters' hands. What this meant for BSES, what the chairman thought of it and what would be the broad business plans of the Reliance group for BSES are aspects shareholders would have liked to hear from the chairman.

In what was otherwise a comprehensive and quality account of virtually every facet of the company's operations, including issues such as the rise in market capitalisation, level of dematerialisation, online coverage of the AGM and compliance governance code, the silence on the single-most important development for the company, stands out in a disturbing manner.

A threatening posture: If Mr. Ratan Tata was quite expansive about the plans for Tetley in Tata Tea's scheme of things, the posturing at the meetings of Tata Electric Companies to approve the merger was very different. Queries were raised about the swap ratio and valuation.

The Tata group chairman virtually offered shareholders only a fait accompli , which would only be viewed as an exercise in arm-twisting, stating that if the board-approved swap ratio was not cleared, the merger would be called off.

And to add more weight of a rather unwarranted nature, Mr. Tata also observed that in the absence of consolidation of the three companies -- Tata Hydro, Andhra Valley and Tata Power -- each would be vulnerable to a takeover. Incidentally, it is quite possible in a takeover situation, the shareholders may get a better deal if the general trends in the market for corporate control is anything to go by.

Of course, it would have been unacceptable to the promoter group. But, finally, the swap-ratio in its original form was cleared. But, surely, the Tata group top management could have adopted better and more transparent ways to see the issue through the body of shareholders.

And a helpless one too: If in these cases the shareholders were not badly off, Century Textiles is in a different league. Once a blue-chip, coveted by investors and speculators alike and bestowed with extremely high valuations, in the last four years, the stock price has witnessed a meltdown.

With a presence in numerous businesses but no edge in any from a long-term perspective (this did not matter in a protected environment), the company's performance has suffered. Shareholders raised demands for buyback so that some cash may be returned to them (not that the company is cash rich unless one considers the investments as possible sources of cash).

But all that they got was a comment of helplessness from the executive director, Mr. S. K. Birla, who chaired the meeting. The thrust of the comment was that survival was the top priority for the company. That is the bottomline -- survival and not growth.

Hardly the kind of message that shareholders would have wanted to hear, but one to which they were pushed by the ambitious plans of diversification of the promoters over the years. But, at least, Century Textiles shareholders were lucky to hear a candid response unlike the bullying tactics at Tata Electric Companies and the silence at BSES on a key matter. A common failing at all these meetings is the failure of the managements to realise that shareholders deserve better.