The continuing boardroom battle at the Tatas has brought mutual funds into a huddle, given their over Rs 20,000 crore investment in shares of listed companies of the conglomerate as also the huge amount of money parked by Tata firms in various debt and equity funds.
To safeguard the investors’ interest, the fund houses are keeping a close watch on the developments and are looking to take a collective call on the resolutions to be moved at shareholder meetings of various listed Tata firms.
The main promoter entity Tata Sons has already proposed extra-ordinary general meeting of shareholders at some firms to seek ouster of Cyrus Mistry from their respective boards.
Mistry was removed as Tata Sons chairman last month while his predecessor Ratan Tata was called back as the interim head, triggering a major boardroom battle in the group with a flurry of allegations and counter-allegations from the two sides.
Mutual funds, which have an exposure of over Rs 20,000 crore in shares of various Tata companies, are keeping track of the developments and are being wooed by both the camps for support, top fund managers said.
Foreign portfolio investors, who are also heavily invested in Tata shares, are also closely monitoring the moves and have approached the markets regulator Sebi, independent directors and management of respective companies to ensure the minority investors’ interest is safeguarded.
The foreign and domestic institutional investors are worried about the plunge in share valuations after Mistry’s abrupt ouster from Tata Sons and the subsequent boardroom battles at the group’s various listed companies. The board members of some companies have already appeared to be divided.
Regarding mutual funds, a committee headed by chief of a leading private fund house is monitoring the developments related to the Tata-Mistry saga, sources said.
The committee comprises 19 members, including chief investment officers of various fund houses.
Given the sensitivity of the matter, none of the fund managers agreed to be named, but said they are still convinced about long-term returns from Tata stocks, but want to be assured that the short-term volatility gets contained. Some are also concerned about any possible redemption pressure by Tata group companies regarding their huge investments in various debt and equity schemes of various fund houses.
The fund houses with significant exposure to various Tata stocks include ICICI Prudential MF, Reliance MF, SBI MF, HDFC MF and Franklin Templeton MF.
In the past two weeks, Tata Group firms have witnessed a combined market capitalisation erosion of around Rs 50,000 crore. “The exposure of fund mangers is scattered across several sectors that recent drop in stocks of Tata Group firms will not have any major impact on their investments in longer term,” chief investment officer of a mutual fund house said.
MFs may become pricey under GST, AMFI seeks safeguards
Mutual fund industry body AMFI has sought safeguards under the new GST regime as they believe that MF units could become more expensive due to increase in cost or compliances.
AMFI (Association of Mutual Funds in India), along with PwC, made a representation to GST Commissioner Upendra Gupta last month and requested that securities should be excluded from the definition of goods or otherwise exempted from levy of GST.
Under the present VAT and service tax laws, transactions in securities are not taxed. If supply of securities is liable to new goods and services tax (GST) tax, the very existence of the MF sector would be jeopardised, it felt.
The industry body has requested that GST Model law should provide for centralised registration and reflect details of all the places of business. The current provisions of the law would impose an enormous burden of compliance on an assessee as he is required to register and file returns from more than one place of business.
The GST Commissioner is believed to have said the entire service industry is generally very late in representing to the government on their viewpoint and that due to paucity of time, many genuine aspects may not see the light of day.
But he agreed that single return compliance or centralised registration should be the order of the day for the financial services sector, and the central government has agreed to it. Sources said the industry needs to approach state governments to sort it out. They also stressed that if the industry comes up with a solution which is a win-win for all, the proposal can be looked at.
As per the the Model law, GST is to be paid at the place where a service is deemed to be supplied. Besides, the head office and the branch of the asset management company will be treated as separate persons.
The asset management activity is normally undertaken by the AMC from its head office where the fund managers are located while the marketing of the schemes takes place all over the country through the head office and the branches.