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Azim Premji trusts get a share of his wealth, but not voting rights

Azim Premji and his family together hold 4.22% in Wipro. (Reuters)Premium
Azim Premji and his family together hold 4.22% in Wipro. (Reuters)

  • Azim Premji Philanthropic Initiatives and Azim Premji Trust will receive benefits from 14% in Wipro and potentially from another 53% of Azim Premji’s total stake in the firm
  • The two trusts have stayed away from voting on any resolutions pertaining to Wipro and also can’t nominate members to the board

New Delhi: Billionaire Azim Premji’s two charities have been made partners in three companies that hold his 56% stake in Wipro Ltd, allowing the trusts to receive monetary gains from the shares even as Premji can retain the voting rights, a person aware of the development said.

The two charitable trusts—Azim Premji Philanthropic Initiatives Pvt. Ltd (APPI) and Azim Premji Trust (APT)—have, however, stayed away from voting on any resolutions pertaining to Wipro. The trusts also can’t nominate members to Wipro’s board, the executive said, requesting anonymity.

After last week’s transfer of 34% of economic ownership of Wipro shares to the charitable trusts, Azim Premji Philanthropic Initiatives and Azim Premji Trust, will not only own and get economic benefits from 14% in the company, but will also stand to earn money from an additional 53% of Premji and his family’s total 74.29% stake in the company.

“Our approach is a simple one. The trust focuses on funding philanthropic initiatives. The board and management of the company focuses on the company operations," said K.R. Lakshminarayan, chief endowment officer at Azim Premji Foundation.

Premji, along with his wife, Yasmeen, and two sons, Rishad Premji and Tariq Premji, holds 4.22% in Wipro. Three partnership firms—Hasham Traders, Prazim Traders and Zash Traders—together own 56.03%; Azim Premji Philanthropic Initiatives, earlier called Azim Premji Foundation, and Azim Premji Trust hold 0.34% and 13.67%, respectively. The remaining 0.2% is held by Hasham Investment and Trading Co.

Azim Premji Philanthropic Initiatives and Azim Premji Trust, since being inducted as partners of the three partnership firms, will receive all monetary benefits accruing from 53% of Wipro’s shares, while Premji will retain the remaining 3% shares held by these partnership firms.

This means Premji and his family will get dividends and any other economic benefits from only 7% of shares in Wipro, while 67% of the proceeds will go to the Azim Premji Endowment fund, the corpus of which swelled to $21 billion as of 13 March.

A spokesperson for Azim Premji Trust declined to comment on the change.

Premji’s approach of separating legal and economic ownership of shares donated by him to trusts is probably the first-of-its-kind structure in corporate India.

“Corporate governance in India enters a new era with Mr Premji’s magnanimous action of transferring a significant portion of his beneficial interest in Wipro shares," said Shankar Jaganathan, founder of CimplyFive Corporate Secretarial Services, a tech solutions provider for compliance standards.

“This move has the potential to impact governance practices in Indian companies by getting the investors and regulators to give equal importance to the intent of the promoters as they give to their actions," said Jaganathan, who has authored the book, Corporate Disclosures: The Origin of Financial and Business Reporting.

Tata Trusts, which owns 66% in Tata Sons Ltd, the holding company of the Tata group, earns dividends and retains right to nominate as many as three directors to the holding company’s board. Additionally, Tata Trusts can also appoint the chairman of the group holding company.

Also read: More promoters put faith in trusts to save taxes, plan succession

However, while Premji is the chairman of both Wipro and the two trusts, Ratan Tata is the chairman of Tata Trusts and Natarajan Chandrasekaran the chairman of Tata Sons.

More than three dozen companies, including Mahindra and Mahindra Ltd and GMR Infrastructure Ltd, have set up trusts as part of their promoter group of shareholders. But most of these trusts have been founded primarily with an eye on succession planning and also to save from any potential inheritance tax.

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