Finolex Cables case related to promoter fight | Economic Times

Whenever Finolex Cables proposes independent directors, the other brother does not approve it. So, those directors are appointed as additional directors till the next AGM and they are eventually defeated at the AGM. So the company appoints a new set of directors the next day and this continues till the next AGM, says JN Gupta, Founder & MD, Stakeholder Empowerment Services. In your latest report, you have observed that some of the events and happenings at the company level are quite detrimental to the rights of the minority shareholders. You have come out with a set of recommendations.What are the big concerns as far as Finolex Cables is concerned in your observation?One should not look at Finolex Cables alone. There are two companies in the stable Finolex Cables and Finolex Industries, which are currently headed by cousin brothers. There is an intense fight between the brothers over the ownership of the shares that are held in some trust. Both are at loggerheads and one party votes against the other in the meetings. The structure of this company is such that major shareholding is in the hands of a Trust where voting power is exercised by the other brother. As a result, the resolutions proposed by Finolex Cables are defeated at AGMs regularly. One cannot look at the outcome of the resolutions purely on the basis of correctness or governance issues. It is more because of a fight between the two brothers. Whenever the company proposes independent directors, the other brother does not approve it. So, those directors are appointed as additional directors till the next AGM and they are eventually defeated at the AGM. So the company appoints a new set of directors the next day and this continues till the next AGM. This gives a very important signal to us and to the regulator to find a solution for such fights between the promoters because they are hurting themselves and they are hurting millions of other investors and stakeholders more. Finolex Cables and Finolex Pipes have been the market leaders in their respective fields for the last 20-30 years. But look at their market cap today. Their much younger competitors have market caps three to four times their size. These brothers should realise that what they have lost in fighting is not only their loss, it is the loss of other investors also who are beyond 50% in the company. Today the law does not provide a solution to the public shareholder against promoter fight because whatever resolution the public shareholder will bring will not be passed because of the majority held by these two people. So the regulator has come out with an out-of-box solution for such a situation. You have brought up a very important point of value destruction or value preservation on the behest of minority shareholders. The shareholders’ meeting is scheduled for September 29. What are some of your recommendations for shareholders? We have given our recommendation based on the information that is there with us which is based on what was declared in the annual report or in the notice. I would say that our analysis or our recommendations have no meaning because the bulk of the voting power is with the other party and until the two brothers come together and want to save the company.