We have previously highlighted the rise of shareholder activism in India (here and here). Activism has been aided by regulatory reforms that have enlarged shareholder participation. In addition, market changes have resulted in previously passive institutional investors becoming more active in recent times. They have further been supported by the emergence of a growing and vibrant proxy advisory community in India.
At the same time, there is some cynicism surrounding shareholder activism in the Indian context due to the concentration of shareholdings in most listed companies. To what extent can outside shareholders (even institutions) play a role in influencing the governance of such companies? Is activism likely to have any impact at all? These questions can possibly be answered through empirical evidence. While we are not aware of any detailed empirical studies that measure the impact of shareholder activism in India, an emerging body of case-study evidence points towards some influence that institutional shareholders have brought to bear on Indian companies in the new environment.
In this regard, a recent report issued by IiAS, one of the proxy advisory firms in India, carries out a case-study analysis that indicates that outside shareholders have become more active in India, and have also been successful in defeating proposals of management and promoters where they have been found to be adverse to minority shareholder interest. The report contains a number of illustrations. Moreover, it lists out the various strategies available to shareholders to assert their rights and remedies under Indian law.
These findings indicate that despite concentration of shareholdings, there is room for shareholder activism in Indian companies, and that the influence of institutional shareholders is set to grow.