Indian shareholders normally vote with their feet when they disagree with major proposals initiated by a company’s promoters. When it seemed to most investors that the Vedanta group’s recent restructuring proposal was loaded against minority shareholders of India-listed Sterlite Industries India Ltd, many of them sold their holdings, leading to a 28% drop in the stock. True, the broad markets have also fallen during this period, but at a much lower rate of 8%.
Institutional shareholders of the Vedanta group have shown a better way for shareholders to express displeasure with the proposal. According to news reports, one of these shareholders even threatened legal action, which seems to be the main reason the company has abandoned its restructuring plan. As a result, Sterlite shares gained by more than 8% on Wednesday.
This is one of the rare cases of shareholder activism, where shareholders of an Indian company have benefited. Indian shareholders need to take a leaf out of the books of their foreign counterparts, especially since it’s not uncommon for minority shareholders to be short-changed in our markets.
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