Over Rs 37,000 cr LIC assets at stake as titans clash in Tata

Bombay House, the Tata Group Headquarters
State-owned insurer Life Insurance Corporation of India (LIC), which had over Rs 37,000 crore investments in Tata group firms, is watching the unprecedented events unfolding in the country’s top corporate group closely.

Following reports of the letter by sacked group chief Cyrus Mistry, which makes several allegations including shareholder intervention in group companies, at stake are big investments worth thousands of crores in equity and debt instruments of several Tata group companies.

The letter written to Prime Minister Narendra Modi by Interim Chief Ratan Tata on Monday — the day Mistry was sacked — and Mistry seeking an appointment with the PM needed to be seen in this context.

Governance experts said LIC needed to ask relevant questions to protect its investments.

According to data compiled by Business Standard Research Bureau, LIC has large equity investments in 11 listed firms in the Tata group. The total value of these stakes of one per cent or more worked out to Rs 37,581 crore.

Most valuable of these investments was the 3.2-per cent stake in Tata Consultancy Services, which itself was worth Rs 15,172 crore at current prices. Its 5.2-per cent holding in Tata Motors was worth Rs 9,263 crore. Both these stocks have seen some value erosion with Mistry being removed from the helm of the group holding company, Tata Sons. Though the value of investments is substantially lower, LIC has higher voting powers in Tata Steel and Tata Power, where it owns 13 per cent each. It owns significant stakes in Tata Global (9.8 per cent), Indian Hotels (8.8 per cent) and Voltas (7.2 per cent).

These voting powers would become significant if key decisions including the removal of Mistry from individual company boards come up for shareholder voting. “Till now, the issue was limited to an unlisted company (Tata Sons) and firing of its chairman. But, with the letter of Mistry making several disclosures about the affairs of the group’s listed companies on several issues that border on misgovernance and interference from shareholder, it is high time that institutions such as LIC tighten their belts and safeguard their investments,” said J N Gupta, managing director, Stakeholders’ Empowerment Services, a proxy advisory firm that advises institutions on corporate governance issues.  Gupta said LIC and other institutions should raise relevant questions “not only now, but on a regular basis to keep the management on toes”.

The role of independent directors also needs to be looked into, he added citing references made in Mistry’s letter. In his letter, Mistry alleged that alternative power centres “without any accountability or formal responsibility” were created and independent directors were reduced to “mere postmen.”

“As an example, once the trust directors (Nitin Nohria and Vijay Singh)  had to leave a Tata Sons board meeting in progress for almost an hour, keeping the rest of the board waiting, in order to obtain instructions from Mr Tata,” Mistry wrote adding the circumstances prompted him to circulate a note on corporate governance in order to clarify the distinct roles of Tata Trusts, Tata Sons board and the boards of the operating companies.