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Mumbai – Some former Tata Group executives have teamed up with an experienced investor to try to bring about change in Indian companies, as part of a rare attempt to influence management in a country where shareholder activism has hardly taken root.
Former Tata employees, including Mukund Rajan and Govind Sankaranarayanan, have teamed up with Ajit Dayal, founder of Quantum Advisors, a mutual fund company, to create a fund to invest in smaller stocks to help them progress as a corporate government.
The team is hoping to get regulatory approval from the tentatively appointed Active Mobilization Fund by May, and is seeking to raise and invest $ 1 billion over the next three years, Sankaranarayan said in an interview. in Mumbai. The fund plans to invest from September.
Sankaranarayan, who has spent more than two decades in the Tata group, said the fund had deliberately fled the nickname of the activist and positioned itself as an environmental, social and governance vehicle (ESG) because aggressive activism simply would not succeed in India. The reason, he says, is that founding shareholders typically tend to own up to 40% of companies. Instead, the fund will invest in smaller companies where homeowners are more likely to be open to change, he said.
"Unlike the United States, activism is less likely to work in India because the founders of most companies exert great influence because of the considerable stakes they hold," Sankaranarayan said. "We need to engage with the founders in a compelling and meaningful way to lead our ESG program."
Governance issues
Corporate India is grappling with a range of governance issues, ranging from trading relationships with parties to bad debt information. Tata, on the other hand, is considered in the market as having high corporate governance standards.
"The fact that the founders of this fund have been badociated with the Tata Group will open many doors," said Amit Tandon, MD, of the institutional advisory firm Institutional Investor Advisory Services. "If someone tells me that a person is badociated with Tata for a long time, I will certainly love to meet him once."
The fund will be distinguished from conventional ESG vehicles in that it will select 20 to 25 companies with lower or average ESG scores and likely to improve. Generally, ESG funds select companies with higher scores in these rankings. The fund has a minimum of $ 100 million in notes and will target large investors such as university endowments, sovereign wealth funds and pension funds.
Four of the six founders of the fund previously worked for Tata and one of Grant Thornton Advisers. Dayal, of which Quantum Advisors already advises or manages more than $ 2 billion of foreign investment in India, will design and oversee the fund's investment strategies.
Sustainable investing is still a nascent concept in India. According to data compiled by Value Research, the ESG Magnum Equity Fund SBI is the only Indian fund clbadified as a portfolio investing in sustainable badets. Avendus Capital, a hedge fund operator, started receiving funds in February for its ESG fund and is also looking to raise $ 1 billion over three years.
"We are basically aiming to identify and work with founders and management who want to follow a more transparent path and the market rewards them for it," said Dayal.
According to the most recent data from the Global Sustainable Investment Alliance, published in a report sponsored by Bloomberg, the parent company of Bloomberg News, nearly $ 23 trillion was invested in ESG strategies globally at the end of 2015 .
Bloomberg
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