Back‘Shareholder activism could help minority shareholders’
Sebi chairman Ajay Tyagi said early trading settlement cycle will be beneficial for investors
PremiumMUMBAI : Commenting on the recent spate on shareholder activism in the Indian stock markets, which has seen many shareholders vote against resolutions proposed by companies as well as moves by shareholders to replace existing board members, Sebi chief Ajay Tyagi on Thursday said that such shareholder activism is good for everyone, especially minority investors.
Tyagi also defended the regulator’s proposal to reduce the stock trading settlement cycle to T+1 days from the existing T+2 days, which has drawn flak from foreign institutional investors as well as domestic brokers.
“I would say that's (shareholder activism) good for everyone, especially minority shareholders. If shareholders are getting cautious as to if they are holding shares in a company, what is their role while voting on a resolution, no one can dispute that should not be there," said Tyagi, speaking at the CII Financial Markets Summit.
“There could be argument that whether they are rightly advised or not, but then that is up to them. If we say that investors have a right to invest in F&O market, they can invest in risky trades, they are adults, so they definitely have their own mind. It is something which no one should find fault with or should have any problem. So it is something which is very good, I would say for the shareholders actually applying their mind and not going by the herd mentality and deciding on their feet as to what should be done in each of the resolutions," he added.
On Sebi’s proposal to move towards a T+1 settlement cycle, Tyagi said that early settlement is beneficial for investors and one should try to move towards it.
“It is something which one should wish to go forward to. And if your systems need improvement, you should improve those systems. No one can argue that early settlement is always good. And in today's day, there is a technology, so to say that it is not at all doable, or it is not possible, it's not correct. There is no harm in taking initiative in something and you can't just say it has not happened elsewhere," he said, adding that investors need to do some introspection.
Apart from foreign investors, the Association of National Exchanges Members of India (Anmi), a group of over 900 stockbrokers across the country, has also raised concerns on issues related to the implementation of the T+1 settlement system.
Speaking on the activity in the IPO market, the Sebi chief said that the regulator is looking into reforming IPO price bands, since the narrow price bands seen in many IPOs defeats the purpose of price discovery through the book building process.
“If price discovery has to happen through book building then there should be some band.
If the band is just one rupee, then where is the book building. We are examining this," said Tyagi.
He also added that while retail market participation has increased both in primary and secondary markets, the regulator is not contemplating to increase the quota for retail investors in IPOs.
“IPO market price discovery is not as transparent as compared to the secondary market. While there are many disclosures, it is difficult for retail investors to study them as the documents are bulky and technical, and then then it just becomes a herd mentality to chase IPOs. While we encourage retail participation in IPOs, instead of increasing the retail quota we would rather see their participation in secondary markets where there is more information about the company and more liquidity," said Tyagi.
Tyagi also added that the regulator is working on various initiatives to deepen the corporate bond markets.
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