Active listening: Boards must open-up to investors
Florintree Advisors Private Limited (‘Florintree’) is the second fund in almost as many months to seek a seat on a company’s board: they have sought to appoint a director on the board of PTC India Limited. Before this, Unifi Capital Private Limited had sought to appoint a ‘small shareholder director’ on the board of Alembic Limited, in July. Meanwhile India Horizon Fund, together with IDBI Trusteeship, has gone all-in. It has moved the Delhi Bench of the National Company Law Tribunal, and is seeking ouster of the company board for mismanagement and oppression of minority shareholders. In contrast to India Horizon seeking legal remedy, Florintree, like Unifi before, have sought shareholder support to have their representative on the board.
The underlying rationale in demanding a seat on the high table in both cases is the same. One, the shares trade at a discount to what these fund managers perceive their intrinsic value to be. Two, there are obvious fixes that stare boards and management in the face. Three, a seat on the board will foster meaningful discussion on such repair and should there be consensus on the proposed path, all shareholders – including the ‘promoters’ benefit.
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