 "<b>Street Food:</b> More big bulls need to speak up")
It is too early to herald it as a new era. Even to call it a good start might be risky, unless we see some follow-ups in the near future. Yet, last week’s move by billionaire investor Rakesh Jhunjhunwala, asking Tata Motors to disclose more, raises hopes.
Given the impact of foreign exchange on operations, Jhunjhunwala, whose market holdings with wife Rekha are worth over Rs 8,000 crore, asked the Tata Motors management to improve its disclosure on hedging practices, according to a Business Standard report. Jhunjhunwala cited the example of Infosys and other companies which disclose their hedges and the rate at which it is done.
Forex components, according to him, have become an important part of Tata Motors' profit. “If you guide us on how you hedge, it will give us a better assessment of the future profitability,” he said.
Several names such as Carl Icahn, Bill Ackman and Dan Loeb crop up in the global markets. These investors have often been aggressive and given a tongue-lashing to executives and management in the form of open letters and reports. The developed markets also offer better opportunities for investors to make money on the downside or by shorting.
Here, investors often keep mum or exit quietly, as talking against a investee company could often destroy one’s own wealth. Due to such risks, investor activism in India is left to people who do not have much skin in the game itself. Proxy advisory firms, yet to build enough clout, and a handful of small shareholders who try to gather information from the public domain, raise issues against large companies through court cases. They and the media are key players in the Indian activism scene.
While the proxy advisories are getting more acceptance, as more and more institutions subscribe to their reports and recommendations, the other set often gets ridiculed and dismissed as ‘mad people’ or ‘jokers.’ But, they still manage to get some big scalps once in a while, proving they are not jokers after all.
It is time large individual investors such as Jhunjhunwala and Dharamshi raise their influential voices towards better disclosures and healthy practices by companies more regularly. There are at least two dozen individual shareholders whose holdings are worth a few hundred crores. These investors should take it upon themselves and become more vocal, more active.
It is not necessary that each of them should come out guns blazing, attacking companies and their management. However, a little more talk and public engagement could contribute to the diversity of opinion and help in better price discovery. Right now, one gets a feeling that a very small group of people are being put in the loop. The Securities and Exchange Board of India (Sebi) has taken steps to improve institutional participation in the voting process. It should also engage with these large individual investors and get them to contribute more towards the development of a more vibrant market place. For example, Dharamshi had told this writer how the requirements to call an EGM are onerous and often discourage small investors from standing up to questionable practices. Such insight is valuable.
Sebi should take a fresh look at and take steps to revive the short-selling and lending & borrowing mechanism it had launched a few years earlier. That might get the big bulls to get talking a bit more often.
Given the impact of foreign exchange on operations, Jhunjhunwala, whose market holdings with wife Rekha are worth over Rs 8,000 crore, asked the Tata Motors management to improve its disclosure on hedging practices, according to a Business Standard report. Jhunjhunwala cited the example of Infosys and other companies which disclose their hedges and the rate at which it is done.
Forex components, according to him, have become an important part of Tata Motors' profit. “If you guide us on how you hedge, it will give us a better assessment of the future profitability,” he said.
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Last month, Jhunjhu-nwala’s friend and value investor Kalpraj Damji Dharamshi led the call for an Extraordinary General Meeting (EGM) in Ricoh India, a company that has been going through serious trouble after accounting irregularities were unearthed. However, such instances are few and far between.
Several names such as Carl Icahn, Bill Ackman and Dan Loeb crop up in the global markets. These investors have often been aggressive and given a tongue-lashing to executives and management in the form of open letters and reports. The developed markets also offer better opportunities for investors to make money on the downside or by shorting.
Here, investors often keep mum or exit quietly, as talking against a investee company could often destroy one’s own wealth. Due to such risks, investor activism in India is left to people who do not have much skin in the game itself. Proxy advisory firms, yet to build enough clout, and a handful of small shareholders who try to gather information from the public domain, raise issues against large companies through court cases. They and the media are key players in the Indian activism scene.
While the proxy advisories are getting more acceptance, as more and more institutions subscribe to their reports and recommendations, the other set often gets ridiculed and dismissed as ‘mad people’ or ‘jokers.’ But, they still manage to get some big scalps once in a while, proving they are not jokers after all.
It is time large individual investors such as Jhunjhunwala and Dharamshi raise their influential voices towards better disclosures and healthy practices by companies more regularly. There are at least two dozen individual shareholders whose holdings are worth a few hundred crores. These investors should take it upon themselves and become more vocal, more active.
It is not necessary that each of them should come out guns blazing, attacking companies and their management. However, a little more talk and public engagement could contribute to the diversity of opinion and help in better price discovery. Right now, one gets a feeling that a very small group of people are being put in the loop. The Securities and Exchange Board of India (Sebi) has taken steps to improve institutional participation in the voting process. It should also engage with these large individual investors and get them to contribute more towards the development of a more vibrant market place. For example, Dharamshi had told this writer how the requirements to call an EGM are onerous and often discourage small investors from standing up to questionable practices. Such insight is valuable.
Sebi should take a fresh look at and take steps to revive the short-selling and lending & borrowing mechanism it had launched a few years earlier. That might get the big bulls to get talking a bit more often.