New Delhi, July 22: Financial institutions, which have a combined stake of 24.69 per cent in Britannia Industries Limited, are pressing for the appointment of a nominee director on the board of the foods major, but the company appears to be stonewalling the demand.
“Ever since Sunil Alagh was removed as managing director of the company, we have been requesting Britannia to appoint a nominee director who will protect our interests,” says a senior official with General Insurance Corporation (GIC), the national re-insurer.
GIC sources said they had been promised that the request would be considered by the Britannia board, which is scheduled to meet on July 29 to consider the unaudited results for the quarter ended June 30. The institutions could also raise the issue at the annual general meeting on August 8 if the board does not consider the request at its meeting on July 29.
However, company officials said they were unaware of the demand. “Why should this issue be taken up at the annual general meeting at all' The FIs can say whatever they want to. We’ll see when they make a request. I can’t share anything at this point of time,” said Nikhil Sen, chief operating officer of Britannia.
Contrary to what sources in financial institutions say, Sen seemed to indicate that there has been no demand from the financial institutions in this regard since the termination of 56-year-old Alagh’s contract.
The Britannia board has 10 members, of which four are independent directors. Nusli Wadia, chairman of Bombay Dyeing, heads the Wadia interests at Britannia while Simon Israel, Singapore-based chairman of Danone (Asia Pacific), represents the French food giant.
GIC and its subsidiaries hold 7.7 per cent in Britannia, while Life Insurance Corporation holds 12.32 per cent. Unit Trust of India has a much smaller stake — 4.67 per cent.
“Nusli Wadia (Britannia’s chairman) has neither met nor communicated with us. However, I have been assured by one of Britannia’s executives that our request will be placed before the board on July 29,” said a senior official with one of the financial institutions.
“We have collectively asked for the appointment of a nominee director on Britannia’s board,” said a top LIC official, confirming that such a demand has been made. However, he said LIC had “purchased shares from the market for purely investment reasons.” “We are not interested in the management or running of the company,” the LIC official added.
The agenda for the AGM on August 8 will cover the usual business plans, reappointment of directors and delisting from a couple of stock exchanges, said a Britannia official who refused to go into the specifics.
Asked whether Alagh’s removal had influenced the financial institutions’ decision to seek the appointment of a nominee director on the board, a senior FI official said:
“We have been asking for the appointment of a nominee director since 1998. But it is true that Alagh’s dismissal has made us more alert, agile and active. Being a government held company, we have the responsibility of safeguarding the investment of other shareholders.”
The official was upset over the way the company handled Alagh’s removal. “If there was truth in the allegations about misuse of funds against the former MD, what was the audit committee doing' Plucking flowers' And one fine morning, Wadia comes along and announces that Alagh had swallowed all the money!”
“We want our investments to be safe and sound. We fear Alagh’s termination may just worsen the situation.” Industry sources reveal that in 1998, A.. Poddar, former chairman cum managing director of National Insurance, was chosen as the nominee director to represent FIs but the appointment was never formalised.
If a nominee director is appointed now, he would be either from LIC or GIC since they are the only major FI stakeholders.