Finolex Cables under pressure after two advisory firms accuse the firm of poor corporate governance

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Finolex Cables under pressure after two advisory firms accuse the firm of poor corporate governance
Finolex Cables
  • Proxy advisory firms have flagged corporate governance issues at Finolex Cables and advised shareholders to vote against reappointment of three directors at the annual general meeting.
  • All eyes are now on the AGM scheduled for Wednesday, September 29.
  • Reacting to the reports, shares of Finolex Cables were down 1% on Tuesday.
Finolex Cables has come under the radar of proxy advisory firms as they raise corporate governance issues in the company right before the annual general meeting.

Proxy advisory firms -- InGovern Research Services and Stakeholders Empowerment Services (SES) have reportedly highlighted governance issues at Finolex Cables, stating that the board may be violating corporate governance norms. Moreover, they have advised shareholders to vote against the reappointment of the company’s directors. Proxy advisory firms provide research, data, recommendations on management of companies that will help shareholders vote rationally in a shareholder meeting.

Apart from this, family feud in the Finolex Group companies -- Finolex Cables and Finolex Industries -- seem to have gone too far. Mahesh Viswanathan, the chief financial officer of Finolex Cables, stated the allegations as false and accused Prakash Chhabria, chairman of Finolex Industries and the cousin of Finolex Cables chairman Deepak Chhabria of instigating shareholders and creating a controversy.

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“There are two companies in the stable, Finolex Cables and Finolex Industries, which are currently headed by cousin brothers [sic]. There is an intense fight between the brothers over the ownership of the shares that are held in some trust. Both are at loggerheads and one party votes against the other in the meetings,” said JN Gupta, founder and managing director at proxy advisory firm SES in an interview to The Economic Times.

Finolex cables is the largest manufacturer of electrical and telecommunication cables. Finolex Group is an Indian conglomerate company based in Pune comprising Finolex Cables, Finolex Industries, Finolex J-Power Systems and Finolex Plasson Industries.

In the ₹7,500-crore Finolex Cables, about 30.7% stake is held by Orbit (Finolex Group holding firm), 14.5% is held by Finolex Industries and the rest is with the public. Adding to it, these three companies have four common directors -- Deepak and Prakash Chhabria, Sunil Pathak and Sanjay Asher.

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Investors will now monitor the annual general meeting (AGM) that will result if additional directors -- PR Barpande, Avinash Shridhar Khare and Firoza Fredoon Kapadia are reappointed or not.

The board had appointed them as additional directors on September 30, 2020, and is now seeking shareholders nod to appoint them as independent directors for a five-year term under different resolutions, even though they are liable to retire.

According to proxy advisory firm SES, as stated by a media report, these resolutions are superfluous for one and violative of SEBI norms.

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