Sounding Board. Who still attends AGMs?

It’s 10.30 am on Thursday, July 23, and the reception area at Chennai’s Music Academy is thronging with people. They’re not here to listen to the latest musical prodigy, but to attend Sundaram Finance’s 62nd Annual General Meeting.

The big turnout is unexpected. Starting this year, listed companies are mandated by law to offer remote e-voting facilities to their shareholders. With e-voting, SEBI and the Corporate Affairs Ministry are hoping for higher shareholder activism from minority shareholders.

So, why are so many investors still attending AGMs? The answer becomes evident a little later. As the scheduled time approaches, the crowd at the reception thins out. A few shareholders make a beeline for the hall. The rest head out of the doors, having collected their Grand Sweets snack boxes.

Dividend woes In the hall, I ask the elderly gentleman next to me why he took the trouble to attend, when he can vote electronically. PS Krishnamachari is 80 and a resident of West Mambalam; he has taken a bus to the venue. Clarifying that he doesn’t attend GMs to vote, he explains, “I’ve been a shareholder of this company since it got listed. It has given me very good returns. They declared a bonus last year and pay regular dividends. I attend to listen to what the management has to say about the economy and the company.”

“You see, I am retired and I find attending these meetings a useful way to spend my time,” he adds. Meanwhile, the management has wrapped up its address and many shareholders are queuing up to speak. The questions are quite different from the ones you would hear in conference calls. Some shareholders have come with long, prepared speeches. Despite the Sundaram Finance stock price trebling in the last two years, most queries are about dividends.

One shareholder argues that bonus shares are better than dividends, because senior citizens like him are forced to bear dividend distribution tax. Another requests the company to time its interim dividends to festivals like Diwali to help him meet expenses. Some shareholders are quite aggressive in their demands too. Ramalingam Vidyashankar critiques the modest increase in compensation to the management, and asks why dividends to shareholders remain at 105 per cent.

“All companies need to have independent directors on their Boards. Give me a chance to be an independent director and see how I raise dividends to 500 per cent,” he thunders in Tamil. As the meeting drags on until 1.30 pm, my neighbour decides to leave as it’s well past his lunch time.

Later, the company’s stock exchange disclosure reveals that of the 20,083 shareholders, 2,071 have ‘attended’ the AGM, going by the attendance slips lodged. But only a tenth of them actually sat through the proceedings. Nor have all the shareholders who attended cast their vote - only 1,121 did so.

Face-to-face

The AGM of VA Tech Wabag starts on similar lines, with a good proportion of the crowd filing out after collecting the snacks. But while attendance is thin, there are interesting questions from the shareholders.

“Success brings with it imitation, so what are the entry barriers to your business?” asks Venkatesan, who also worries that the company’s many overseas forays may help growth but bring with it geo-political risks. Two shareholders flag the company’s high receivables position.

As the management addresses these queries, I chat with S Gowri Shankar, a shareholder who had spoken up about pending litigation. Gowri Shankar bought shares of VA Tech Wabag only last year, but he’s a regular at company AGMs. “I own shares in 200 companies and try to attend 50-60 AGMs between May and September every year. It’s a Herculean task, but I do it with a lot of zeal and enthusiasm,” he says.

He has been attending AGMs since 2002 when he retired from a public sector company. He doesn’t do it for the goodies, either. “Snacks fill your stomach but you should realise that the value of the shares you own is much more,” he says. He usually reads up the annual report and marks out questions before attending.

Given that he owns so many shares, does he not prefer e-voting? No, he says. “It’s not interactive and it does not give you a feel of the management. Here I get to ask questions face-to-face.”

A serious investor, he is vexed with the tendency of some investors to waste time at AGMs by raising irrelevant issues. “If I find shareholders ragging the management, I speak up for them,” he says. “It’s difficult to be on the other side. You run a company for 364 days a year and on the 365{+t}{+h} day, turn up to face shareholders too.” Later disclosure shows that, of VA Tech Wabag’s 39,900 shareholders, 345 attended the AGM. But only 226 investors have voted on any proposals, 200 using e-voting.

Less green please IDFC’s AGM venue is choc-a-bloc 45 minutes before the meeting. There’s a scramble at the snacks counter, with some shareholders complaining vociferously about the cramped reception area. Far fewer investors seem to be demanding ballot papers.

This AGM is a watershed one for IDFC because it has just received the coveted banking licence a couple of days ago. After the management makes a short presentation on the change, there are more than half a dozen shareholder speakers.

Quite a few complain about the new green initiative of e-mailing annual reports. One investor talks at length about the quality of the BSNL internet connection at his home and says he has great difficulty reading soft copies. Getting down to business, a few shareholders make good points. Shareholder Jayesh Manik cautions that the banking foray could take considerable time to pay off, given that new private sector banks have taken seven to eight years to gain any meaningful market share.

Murugesan congratulates the management on its very low NPAs, but asks for an explanation on how IDFC being a pure infrastructure lender has managed to contain its bad loans.

After the AGM wraps up, there’s a group of active investors outside who have just attended a series of AGMs and are exchanging notes. I ask Sudarshan, one of them, about why he attends AGMs. He says, “There’s nothing like an interaction to know what a company’s attitude to its shareholders is”. Has he completed e-voting? “I don’t vote. I’m mainly interested in knowing the company’s prospects”. One later finds that of IDFC’s 4.31 lakh shareholders, only 575 have voted.

By now, it is clear that there are two main types of investors who attend AGMs. One set isn’t really interested in the business, but attends for the goodies or an opportunity to be in the limelight. Another set of serious investors, is looking for the rare opportunity to interact with the management. But the pity is, neither group seems to be very keen on exercising its voting rights.

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