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In the first major victory for minority shareholders under the new provisions governing related party transactions (RPT), the special resolution moved by liquor maker United Spirits through postal ballot to approve four RPTs was defeated.
The company said in a late update to the bourses on Friday that the resolution "has not been approved by the members with the requisite majority."
Against the 75% favourable votes required, the resolution garnered only 70.2% votes.
"There was a strong vote in favour of the resolutions but it fell just short of the required 75%. We are therefore surprised and disappointed at the outcome of the postal ballot. We will now look to understand the basis for the shareholder view underpinning this vote, with the intention of returning to shareholders for approval," an USL spokesperson said in response to a query by Business Standard.
According to the new companies act and the amended clause 49 provisions of the listing agreement of Sebi, related party transactions are required to be approved by a 'majority of minority shareholders'.
Therefore, in this resolution, the promoter group shareholders, who held 85.56 million USL shares 'abstained from voting as they are related parties'.
USL Benefit trust, though not part of the promoter group, abstained from voting as it was treated as a person acting in concert.
A clutch of institutions voting against the move derailed the same, voting details published by the company showed. Out of the 59.76 million non-promoter shares, only 20.35 million votes were polled. While 95% of non-institutions supported the resolution, the institutions accounted for majority or around 20.22 million votes polled. Out of this, only 70.03% of votes went in favour of the resolution. Thus, the 6.06 million (29.97% of votes polled) institutional votes that went against the resolution practically defeated it.
Business Standard had reported last week that some institutional investors and proxy advisory firm Stakeholders Empowerment Services had opposed the resolutions in the postal ballot that ended on November 26 and the extraordinary general meeting on Friday. The results of voting on Friday's EGM are yet to be announced. That will decide fate of 12 other RPTs.
The agreements that did not get the approval in the postal ballot include the licence for manufacture and sale agreements with Diageo Brands B.V, Diageo North America and Diageo Scotland, distribution agreements with these three entities and cost sharing agreement with Diageo India private Ltd for expenses incurred on "advertising marketing and promotion activities for alcoholic beverages owned by various Diageo group companies in India," according to the exchange notification.
The USL spokesperson said, "The proposed contracts with Diageo for full distribution by USL of the Diageo portfolio of international brands in India are value accretive for USL and form part of its strategy of building and extending its competitive advantage in the Premium and above market segments. The shareholder circular described how these agreements would enable USL to gain a diverse product portfolio, would be accretive to sales growth and improve the company's standing in the domestic market by virtue of leveraging the Diageo brand and marketing capabilities."
