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New Delhi: Institutional shareholders of Eicher Motors Ltd on Thursday rejected a special resolution to reappoint Siddhartha Lal as the managing director at the annual general meeting of the company. 

The resolution was rejected on the grounds of a proposed increase in remuneration at a time when sales of the company’s products and overall operational performance have remained subdued.

According to regulatory filings, 26.9% of the shareholders voted against the proposal to appoint Lal as the managing director for five years. To pass a special resolution a company needs to garner support of atleast 75% of the shareholders. Another general resolution to appoint Siddhartha Lal as the director to the board of Eicher Motors was passed by 86.12% of the shareholders during the meeting.

Sales of Eicher Motors’ Royal Enfield motorcycles have remained subdued in the last three fiscal years due to factors like economic slowdown, increased prices of products, competition and covid. The second wave and shortage of semi-conductors will impact production and sales in FY22 as well. Hence, shareholders have been mindful of approving a raise in the remuneration of the managing director.

According to an analyst from foreign brokerage firm, in the last few years, shareholders have been quite vocal about remunerations of the senior management, especially if the company is going through a tough time.

“Eicher might call another shareholder meeting to get the appointment of Siddhartha Lal approved. They might decide to drop the increase in salary bit to get the resolution passed. It’s bit of an embarrassment for the management. Eicher’s vehicle sales and operating performance have dropped in the last couple of years due to various factors. Hence, shareholders have not approved of the board decision," added the analyst.

Siddhartha Lal has been credited with turning around the fortunes of Eicher Motors by revamping the Royal Enfield brand and overall operations. The joint venture with Sweden’s Volvo AG for manufacturing commercial vehicles has also been positive for the company.

In 2018, Onkar S Kanwar and Neeraj Kanwar, promoters of Apollo Tyres Ltd, were forced to take a salary cut of around 30% after minority shareholders rejected appointment of Neeraj Kanwar as the managing director of the company, as a result of subdued financial performance of the company.

In FY21, sales of Royal Enfield’s motorcycles dropped by 12% to 573,438 units compared to 656,651 units in FY20, which was an 18.46% decline from FY19. Wholesales took a hit sequentially in the first quarter of FY22 due to an increase in covid-19 cases. New regulations on emission and freight carrying capacity of trucks have also affected the business significantly since FY19.

Due to softening of sales and increase in input costs, Eicher’s operating performance has also taken a beating in the past few quarters.

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