Proxy advisor InGovern seeks removal of Pallonji Mistry from SWSL board

PALAK SHAH Mumbai | Updated on September 24, 2020 Published on September 24, 2020

Mistry is a director of Sterling & Wilson Solar

Proxy advisory firm InGovern has asked shareholders of Sterling & Wilson Solar Ltd (SWSL) to oppose related party transactions (RPTs), reappointment of Pallonji Mistry and continuation of the term of Keki Elavia in the forthcoming annual general meeting of the company on September 30.

Mistry is India’s billionaire construction tycoon and a director of SWSL and Elavia is the independent director of the company.

InGovern has issued a note titled ‘SWSL continuing to take public shareholders for a ride,’ which has flagged concerns over disclosures on RPTs and loan to promoters. It says SWSL’s annual report had recognised the ‘loans to the promoters as RPTs, while auditors have confirmed that the company was in compliance with all statutory requirements.

“The proposal for the material RPTs does not take into account loans given to promoters. As of date, ₹1,176 crore is due to the company by promoters; however these do not form part of the notice to shareholders who cannot give omnibus approval to the board to approve RPTs for an indefinite number of years. Hence, shareholders should vote against the RPTs,” the note by the proxy advisor said.

Also read: Shapoorji Pallonji Group to part ways with Tata Sons

InGovern has further said that since this shareholders vote was a ‘Majority of Minority’ vote, shareholders should weigh in on the proposal. It is a concept where a proposal is passed based on majority votes garnered in favour or against in the minority shareholder category.

When the board of directors changed the terms of the loan, the company did not seek shareholders’ approval, under Section 188, for RPTs when the terms of the loan were changed, InGovern has said.

SWSL is promoted by the Shapoorji Pallonji Group, which raised ₹2,850 crore through the company's IPO in 2019. The IPO objective was to enable the promoters to repay loans of ₹2,563 crore to SWSL within 90 days of listing. But the company got only ₹1,000 crore after 133 days of listing. This saw 75 per cent erosion in stock price of SWSL from the issue price of ₹780 and minority investors suffered. On September 15, SWSL said its promoters were still unable to honour loan commitments for the June 30 deadline and will likely not honour the same due on September 30 too.

“Shareholders have a genuine reason to be concerned whether the board and independent directors are seeking to protect their interest,” InGovern said. SWSL did not reply to email queries.

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Published on September 24, 2020
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