Two U.S. Advisory Firms Asked Investors To Vote Against Parekh’s Reappointment

Deepak Parekh, nominee director and chairman of HDFC Standard Life Insurance Company Ltd., speaks during a Bloomberg 20 India event in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Nearly a quarter of HDFC Ltd.'s shareholders voted against a resolution which sought to extend the appointment of Deepak Parekh as a non-executive director of the corporation beyond October 2019.

Two U.S. proxy advisories—Glass, Lewis & Co and Institutional Shareholder Services—had asked investors to vote against Parekh over his directorship and independence of company's board. ISS cited Parekh being on the board of over six public companies as the reason, while Glass Lewis felt that the board of HDFC is not “sufficiently independent”. BloombergQuint reviewed the advisories shared by the firms.

The resolution put to vote was: Approval for continuation of directorship of Deepak Parekh during his tenure of re-appointment as a non-executive director of the corporation on attaining the age of 75 years on Oct. 18, 2019.

The disclosed voting pattern shows that in the public institutions category, 24.86 percent of the shareholders voted against the resolution. The remaining 75.14 percent voted for it.

Parekh, who is the non-executive, non-independent director on the HDFC board, held directorship in 13 listed and unlisted companies, according to HDFC's annual report for 2017-18—this includes three group subsidiaries.

A second resolution put to vote sought: Re-appointment of Keki M Mistry as the Managing Director for a period of three years, with effect from Nov. 14, 2018.

The disclosed voting pattern here showed 99.46 percent of public institutional shareholders voted for the resolution. Only 0.54 percent voted against it.

The AGM voting results, which were disclosed on Monday night, are surprising, Amit Tandon, founder of Indian proxy advisory firm IiAS, said in a conversation with BloombergQuint. HDFC owns a stake in IiAS.

What we find is that the median for votes ‘against' appointment of directors was about 8 percent in 2016. This year it is about 13 percent in the first six months. It is still nowhere close to the 24 percent number we have seen in this (HDFC Ltd.) case....So, no, it is not consistent with the data we have seen in other cases.

Amit Tandon, Founder & MD, IiAS

The shareholding of HDFC is diversified, with public shareholders owning the entire equity base. Data from the BSE shows that foreign shareholders held 73 percent in the country's largest home finance firm, while domestic mutual funds held about 7 percent.

Details of the shareholders who voted against the resolution are not available publicly. The reason for the adverse vote is also not clear, said Tandon, adding that more details will only emerge later. Domestic investors report why they voted a certain way at the end of each quarter, but foreign investors only report it once a year, Tandon explained.

If you leave aside LIC, which owns 3.8 percent, you would have about 20 investors who would be owning about 25 percent of the stock. So it's not just one but many (investors) who would have voted against the resolution. Therefore, it's a question of a few of them getting together and taking the same view. That's what we need to understand.

Amit Tandon, Founder & MD, IiAS

(Corrects an earlier version that mentioned a 2017 vote on the re-appointment of Renu Sud Karnad)