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MFs take activist stance at shareholder meetings

The voting records of top equity mutual funds in the country show that some of India’s top mutual funds have started taking an activist stance.

While some other funds either voted in favour of company resolutions or abstained from voting, RelianceMutual Fund’s and SBI Mutual Fund’s voting pattern showed they spent time studying the resolutions and voted against some of the resolutions proposed by companies’ management.

Voting by mutual funds in annual general meetings (AGMs) and extraordinary general meetings (EGMs) for portfolio companies are to be disclosed on their websites as per a Securities and Exchange Board of India (Sebi) directive.

Top five mutual funds by asset under management in their disclosures about voting in their portfolio companies during the year 2011-12 have shown they have taken far more interest in the AGMs and EGMs going by their participation in 250 to 400 plus companies AGMs/EGMs during the last financial year.

Reliance Mutual Fund has been quite active in voting during AGMs. In fact, the fund house voted against the resolutions in nine companies. Other top mutual funds like SBI Mutual Fund, HDFC Mutual Fund, ICICI Mutual Fund and UTI Mutual Fund participated and voted in large number of AGMs as per the voting data disclosed on their websites.

Among the top five fund houses, only Birla Sun Life Mutual Fund is yet to make public its voting pattern for 2011-12. Some other mutual funds like Tata Mutual Fund, Franklin Templeton, L&T Mutual Fund have also so far not disclosed their voting data for 2011-12.

Sundeep Sikka, CEO, Reliance Mutual Fund said, “We have been doing it for a long time, it is important to work in the interest of unit holders. For us, it is paramount that voting is in the interest of the unit holders as well as institutional investors.”

“The practice of voting will evolve much more in India now. The trigger has been the Sebi directive to themutual funds,” Sikka said.

Amit Tandon, managing director, Instituional Investors Advisory Services said, “In 2010-11, we found most funds abstained from voting. A cursory comparison of the voting data for 2011-12 with the previous year seems to suggest that funds have now started to vote (for or against). We are compiling the data, and will be able to give definitive commentary once all the data is available.”

SBI Mutual Fund also showed spirited investor activism as it voted in 252 companies AGMs/EGMs in 2011-12. In Gammon India case, in the postal voting SBI Mutual Fund voted against the resolution authorising the board of directors to make certain investments related decision.

SBI also admitted that its representative was not able to attend AGMs of five companies – Jyoti Strucutures, Marico, ITC, Carborundum Universal and Gujarat State Petronet. Other four of the top five mutual funds failed to disclose whether they attended AGMs/EGMs of all portfolio companies or not.

Talking about some mutual funds absenting from some AGMs, Tandon of Institutional Investors Advisory Services said, “A fund may not have attended a meeting because their holding is very small (say 1,500 shares).”

SBI Mutual Fund voted in favour of 138 proposals and against101 proposals.

HDFC Mutual Fund also showed very high degree of investors activism as it voted in favour of 285 company proposals and abstained from voting in case of 172 company proposals. ICICI Mutual Fund (224 company) and UTI Mutual Fund which attended highest number of companies (423 company) AGMs/EGMs, however, didn’t show the similar interest while voting.

ICICI Mutual Fund voting data showed they abstained in all but for two companies – Bank of Baroda and Punjab National Bank – where they voted in favour of the management’s proposal.

UTI Mutual fund voted in favour of the proposals in substantial number of cases, but in majority of cases, they abstained from voting for or against the proposals in the remaining cases.

Dhruva Raj Chatterji, senior research analyst at Morningstar India, a mutual fund research body said, “The voting policy disclosure was brought in by Sebi to show mutual funds as active investor community and to bring in more disclosures from mutual funds as they do hold substantial investments.”


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