Mumbai: Domestic institutional investors (DIIs), including Life Insurance Corporation of India (LIC), are leaning towards abstaining from voting on the proposal to oust Cyrus Mistry as director in upcoming shareholder meetings of Tata group companies, said two people with knowledge of the matter on condition of anonymity.

This could come as a setback for Mistry, since under company law rules, the removal of a director requires only a majority of shareholders present at the meeting and voting in support of the resolution.

So if LIC (and retail investors, most of whom typically don’t show up for such events) abstain from voting, that is as good as a vote against Mistry.

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A quick calculation shows that if LIC and 90% of retail investors abstain, Tata Sons will be able to pass the resolution to eject Mistry or face shortfalls of 3-7%, even assuming that all other institutional investors vote against.

LIC has a 13.6% stake in Tata Steel Ltd and holds 9.8% of Tata Global Beverages Ltd, while retail investors hold between 16-29% in Tata group companies (other than Tata Consultancy Services Ltd, or TCS) where shareholder meetings have been called.

An email sent to LIC had not received a reply as of press time.

The state-owned insurer, apart from toeing the government line, typically doesn’t get into controversies and boardroom battles.

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Mutual funds, banks and financial institutions hold 3.6-14.85% in these Tata group companies, but they too seem to want to steer clear of controversy.

Last week, the investment heads of top mutual funds met Mistry to understand his views on the claims of Tata Sons, a person who attended the meeting said on condition of anonymity. He said his firm is yet to finalize its decision on the proposal to remove Mistry from Tata group firms.

Separately, the Association of Mutual Funds in India (Amfi) proxy advisory committee has chosen not to offer any specific guidance on the matter. Earlier this year, this committee had advised members to oppose a proposal to pay a Rs850-crore non-compete fee to Analjit Singh and other promoters of the Max Group as part of the merger of HDFC Standard Life Insurance Co. Ltd and Max Life Insurance Co. Ltd.

“But this time, Amfi has chosen not to provide any collective guidance on the Tata-Mistry matter and to leave the decision entirely to the fund managers with regards to voting on the proposal..," said an Amfi member, who requested anonymity.

TCS shareholders meet on 13 December. Shareholders of Tata Steel Ltd meet on 21 December, Tata Motors Ltd the following day and Tata Power Co. Ltd on 26 December.

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