It was shareholder activism that led to the buyout of ABN AMRO Bank, to be split among three investors who jointly staged a takeover on one of Europe's largest banks. View it as good or bad, the point is that’s how powerful shareholder activism can be. In India, however, there is not even grassroots shareholder activism. Shareholders who have, for years, stayed invested in a company where there wasn't even a dividend paid out, have felt shortchanged when the company finally decided to delist. All that they could do when they felt that the price they were being paid by the management was highly disproportionate to the value of the firm, was to write a few letters to the editors.
"Large promoter holdings preclude meaningful activism," says Ajay Bagga, CEO of Lotus Mutual Fund, which manages assets worth over Rs 8,000 crore. The average promoter holding in Indian companies is a little over 50 per cent. While there is little retail investors can do about setting or changing the agenda set by the management, institutional investors come with their own baggage of relationships with other group companies. “There is also the issue of a domestic versus foreign institutional investor schism," point out experts.
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