Three proxy advisory firms have recommended shareholders vote in favour of all three resolutions linked to the proposal. The first two special resolutions relate to the preferential allotment of a 20% equity stake to MUFG Bank and the grant of special rights to the investor. These resolutions require approval from at least 75% of votes cast.
The third resolution concerns a USD 200 million non-compete fee to be paid by MUFG Bank to Shriram Ownership Trust (SOT), the promoter entity. This proposal will be put to vote as an ordinary resolution, with promoters abstaining from voting.
Advisory firm Institutional Shareholder Services (ISS) found no concerns with the non-compete fee and clarified that the payment will be made only upon successful completion of the share allotment. ISS added that the fee relates to a genuine restriction preventing promoters from entering competing businesses. Since MUFG Bank pays it directly, not Shriram Finance, it mitigates the risk of value leakage.
Another advisory firm, InGovern, also urged shareholders to support the proposal, citing fair pricing, the investor’s strong credentials, and safeguards for Shriram Finance’s core business and brand. InGovern added that the non-compete fee is proportionate to the investment size and includes clearly defined scope and sunset clauses.
As of end-September, foreign institutional investors held 49.61% in Shriram Finance, domestic institutional investors 18.65%, promoters 25.39%, and non-institutional public shareholders 6.34%. Given the voting thresholds, investor participation in the upcoming EGM will be critical.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)