Showdown looms at EGMs, but funds likely to favour Tatas
TAKING A STAND Most institutions will vote to protect their investments and are unlikely to rock the boat: Fund managers
MUMBAI: In the Ratan Tata-Cyrus Mistry face-off, the spotlight is now on foreign funds, institutional investors and insurance companies.
With promoters and directors gearing up for the extraordinary general meetings (EGMs) of Tata group companies, where they will have to vote on resolutions seeking removal of ousted group chairman Mistry and Wadia group chairman Nusli Wadia as directors, all eyes will be on who these institutions favour.
The EGMs will kick off with Tata Consultancy Services on December 13, followed by Indian Hotels, Tata Steel, Tata Motors, Tata Chemicals, Tata Power and Tata Global Beverages.All the companies have called for EGMs to oust Mistry and Wadia. Both directors will contest these motions, and Wadia is also expected to speak at the EGMs.
Leading fund managers, however, told HT on conditions of anonymity that most fund houses will vote in favour of the Tatas .
“Since Wadia is an independent director and is expected to take an impartial, objective stand, his support for Mistry’s leadership may prompt some funds to take a stand. But overall I think, the funds will not rock the boat,” said a senior fund manager at a leading mutual fund.
According to the head of a foreign brokerage, the EGMs could see some debates on the merits and demerits of each side. “But in the end I think the vote will be for the Tatas as the group and the brand are far too valuable.”
The dispute over Mistry’s ouster and his subsequent disclosures of legacy hotspots in the Tata Group are also likely to be factored in the voting.
Early this week, Mistry met a clutch of top institutions, foreign brokerages and Life Insurance Corp to present his side of the tussle. The Tata Group had already met sections of this segment, including large domestic mutual funds and some major FIIs.
“The actual reasons were probed. While the public stance of violation of ethics was offered, these meetings discussed on other factors, including the lack of a concrete strategy for the past three years,” said one person familiar with the meetings.
The institutions will likely vote to protect their investments. In October, fund houses increased their stake in Tata Motors and Tata Steel, while trimming their exposures in TCS, Tata Motors DVR and Tata Power, according to fund research firm Morningstar.
“Tata Power witnessed some selling from mutual funds in October, after five consecutive months of buying from funds. We have observed that during the year, fund houses have increased the exposure to the stock as the outlook for the company has turned positive,” Morningstar said. Mutual funds also trimmed their exposure in TCS in October, partly due to the ‘negative’ growth prospects of the sector.
Meanwhile, rating agency Moody’s Investors Service on Wednesday said it will be business as usual for listed Tata companies despite the boardroom brawl, but cautioned that any change in the group’s strategy and Tata Sons’ support policy for operating companies could exert pressure on ratings.