Deepak Parekh said Institutional Shareholder Services Ic, which had asked HDFC shareholders to vote against his reappointment, had made similar recommendations in the past as well
Mumbai: Deepak Parekh, the chairman of mortgage lender Housing Finance Development Corp. Ltd (HDFC), said that the company’s investors had voted against his reappointment on the recommendation of a US proxy advisory firm, which cited his directorship in many listed companies as one of the reasons for negative voting. In an exclusive interview with Mint, Parekh said that Institutional Shareholder Services LC (ISS), the proxy advisory firm which had asked HDFC shareholders to vote against his reappointment, had made similar recommendations in the past as well.
Nearly a quarter of shareholders had voted against a resolution seeking to reappoint Parekh as a non-executive director on the HDFC board during a shareholder meet on 30 July. According to the company, Parekh received 24.86% negative votes, while 75.14% voted in his favour.
A second resolution to reappoint Keki M. Mistry as the managing director for a period of three years showed 99.46% of public institutional shareholders voting in favour of the resolution.
While the names of US investors were not known, most of them outsource their voting to custodians who vote on the recommendation of a proxy advisor.
“Typically, US proxy advisors vote against all directors who continue on the boards of more than five listed firms," said Parekh. “They voted in a similar pattern when it came to my re-appointment at Vedanta Resources Plc last year."
According to the outcome of 2017 annual general meeting of Vedanta Resources, 91.5% had voted for the reappointment of Parekh as a director, while 8.48% had voted against him.
Parekh is currently on the boards of seven listed companies, including DP World, Siemens, Indian Hotels Ltd, Vedanta, HDFC Life, Vedanta Resources and HDFC Ltd.
Domestic proxy advisors were, however, surprised at the outcome of the voting. “After two successful fund raises, this is a complete downer. We don’t see domestic investors voting against Parekh. It will be a few foreign investors who have gone out and voted against it," said Amit Tandon, chief executive at proxy advisory firm Institutional Investors Advisory Services (IiAS).
According to HDFC’s shareholding pattern, LIC owns 3.8% while 20 investors own about 25% of the stock. Foreign investors include Aberdeen Asset Management, Oppenheimer Funds and GIC Singapore.
However, according to a foreign fund manager, the reason for voting Parekh out had more to do with the lack of clarity in succession planning at HDFC. This comes even as Parekh spelt out his views on succession planning at the group level in this year’s annual letter to shareholders.
“Deepak Parkeh will turn 74 this year and has already said that he wants to continue as HDFC chairman till 2020, which in our opinion, is longer than warranted. I think some of the shareholders are concerned that there was no clear succession planning in place in HDFC, and the next rung of leadership has not been clearly identified. This is a cause for concern. While his credentials are impeccable, some shareholders wanted to register their concerns," said a head of a large foreign fund manager.