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Mint
3 days ago
- Business
- Mint
Wanted: Independent directors for PSU boards. But where is the approval?
Mumbai: Over three-fourths of India's listed public sector enterprises do not have the requisite number of independent directors, as these companies continue to wait for clearance from various government departments. As many as 62 out of 79 listed PSUs lack the mandated number of independent directors, according to data from Prime Database. Despite repeated regulatory reminders, these companies await clearances from their respective ministries, delaying crucial appointments and inviting penalties from stock exchanges. Government-owned firms, including Hindustan Aeronautics Ltd, Indian Oil Corp. Ltd, Indian Railway Catering and Tourism Corp, State Bank of India, National Aluminium Company Ltd. and Steel Authority of India Ltd, did not have the minimum number of independent directors as of 2 June, according to Prime Database, a Mumbai-based market data tracking firm. The list of non-compliant PSUs includes banks, oil and gas companies, metals and mining firms, power utilities, telecommunications, railways, and engineering firms. According to the Securities and Exchange Board of India's listing regulations, at least one-third of a listed entity's board members must comprise independent directors. Additionally, if the chairman is an executive director, at least half of the board must consist of independent directors. Also Read: HPCL gets new chief, four more large PSUs in queue Boardroom bottlenecks There are more red flags when it comes to board committees: 64 PSUs lack an independent director as chairperson of their audit committee, and 68 companies do not have independent chairs for their nomination and remuneration panels. Additionally, 14 of the listed PSUs are yet to appoint a single woman director, despite gender diversity requirements, according to Prime Database. 'It's ironic that we are asking all private sector companies to comply with these requirements when government-owned companies themselves are non-compliant," said Pranav Haldea, managing director at Prime Database. With PSUs failing to comply with the market regulator's rules, many have been fined by stock exchanges. Last week, National Aluminium Company Ltd (Nalco) was fined ₹33.32 lakh for having only three independent directors—two short of the required five—on its 10-member board. A spokesperson for Nalco said the company was continuously following up with the ministry of mines, its administrative ministry, for the appointment of the requisite number of independent directors. The bottleneck lies in the approval process across various ministries, according to proxy advisory firms. 'The Prime Minister's Office should send a strong message to all concerned ministries and PSU companies that they need to be compliant, as non-compliance by PSUs doesn't send the right message to investors," said Shriram Subramanian, founder and managing director of InGovern Research Services, a proxy advisory firm. 'For instance, when the government, as a major shareholder, is involved in abusive transactions or there is trouble with key management, independent directors are the custodians of minority shareholders' interests," Subramanian said. Also Read: India's PSU banks outshine private peers in arresting bad loans Many of the largest money managers, including BlackRock and Vanguard, have voiced their concerns when these companies have sought shareholder approval for the appointment of directors, according to voting disclosures reviewed by Mint. In August last year, Hindustan Aeronautics sought shareholder approval for the appointment of former chairman C.B. Ananthakrishnan. Nearly a fourth of public institutions opposed the decision. 'Nominee serves as chair of the board and bears responsibility for lack of independence. Nominee is an executive director on the audit committee," noted BlackRock, the world's largest money manager, with $11.6 trillion in assets under management. In the same month, Hindustan Petroleum Corp. sought shareholders' approval for the appointment of Pankaj Kumar as a director, but 28.35% of public institutions, including Vanguard, opposed his re-appointment. Despite governance lapses, investor interest in PSUs has surged. The BSE PSU Index, which comprises 63 companies, has outperformed the Sensex over the last five years. The index has gained 301% between 5 June 2020 and 3 June 2025, while the Sensex has risen by 135.5% during this period.
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Business Standard
05-05-2025
- Business
- Business Standard
Buybacks down to a trickle after tax tweak shifts burden to shareholders
Share buybacks have all but disappeared following a rule change on October 1 last year that shifted the tax burden from companies to shareholders. Under the revised norms, buyback proceeds are taxed as dividends at the shareholders' applicable income-tax rates, significantly increasing the liability for high-networth individuals and institutional investors in the highest tax bracket. Since the change, only two buybacks have been completed: A ₹360 crore repurchase by ferro alloys manufacturer Nava and a ₹72 crore offer by online matrimonial services provider 'Buybacks have dried up since the tax-rule change, which aligned their taxation with dividends. Despite a bear market since October — a period when buybacks typically thrive — activity has been negligible,' said Pranav Haldea, managing director, Prime Database. Dividends and buybacks constitute the primary mechanisms for returning excess cash to shareholders. The new structure seeks to eliminate the tax arbitrage between the two routes. Currently, companies incur no tax outgo on dividend payments, which are taxed solely in the hands of the recipient in accordance with their income bracket. With the parity in tax treatment, market participants are preferring dividends as the more efficient vehicle for capital distribution. Unlike buybacks, dividends do not require the appointment of merchant bankers, face fewer compliance requirements from the Securities and Exchange Board of India (Sebi), and can be executed at a greater speed. Buybacks, in contrast, are administratively heavier and typically take several weeks to complete. Between FY17 and FY19, the share of buybacks in total shareholder rewards increased significantly due to a tax differential. From April 1, 2016, the government introduced an additional 10 per cent levy on dividends, pushing the effective dividend distribution tax (DDT) to 20.6 per cent, while listed company buybacks remained tax-exempt. The proportion of buybacks in total shareholder rewards in FY16 stood at just 1 per cent, rising to an average of 25 per cent over the FY17-FY19 period. To address this tax imbalance, the government imposed a 20 per cent buyback levy from April 1, 2019. Nevertheless, buybacks remained attractive for cash-rich firms as the tax liability rested with the company, not those tendering their shares. The most recent shift in tax incidence has, once again, altered the landscape. A buyback entails a company repurchasing and extinguishing its own shares, thereby reducing its equity base and enhancing metrics such as earnings per share (EPS) and return on equity. 'Companies now prefer dividends to buybacks. The EPS boost from buybacks is marginal, as the buyback amount is small relative to market capitalisation,' said Deepak Jasani, former head of retail research at HDFC Securities. The remaining strategic rationale for buybacks, he said, lay primarily in enabling promoters to consolidate their holdings by not tendering their shares. 'Only firms where promoters seek to raise their stake are likely to pursue buybacks. Otherwise, dividends involve simpler procedures and fewer compliances,' Jasani added.
Time of India
02-05-2025
- Business
- Time of India
Self reliance! In a historic shift, DIIs' shareholding in Indian stocks is now higher than that of FIIs
In a historic shift, DIIs' shareholding in Indian stocks is higher that of FIIs In a landmark shift for Indian capital markets, Domestic Institutional Investors (DIIs) have, for the first time, overtaken Foreign Institutional Investors (FIIs) in terms of their shareholding in NSE-listed companies . As of March 31, 2025, DIIs held a record 17.62% stake, surpassing FIIs at 17.22%, according to data from , an initiative of PRIME Database Group. This shift comes on the back of a massive Rs 1.89 lakh crore net inflow from DIIs during the March 2025 quarter, led by mutual funds which pumped in Rs 1.16 lakh crore, aided by strong retail flows through SIPs. This helped mutual funds cross the psychological double-digit mark for the first time, with their share rising to 10.35%, up from 9.93% in the December quarter. Insurance companies, led by Life Insurance Corporation of India (LIC), were also major contributors, investing ₹47,538 crore. LIC alone added ₹34,435 crore, pushing its share in NSE-listed companies to 3.72%, its highest level in five years. Meanwhile, FIIs recorded a net outflow of Rs 1.16 lakh crore during the quarter, driven by concerns over rising US bond yields and a strengthening dollar. Their share in the market has now dropped to its lowest in 12 years. In absolute value terms, DII holdings at Rs 71.76 lakh crore are now 2% higher than FII holdings, with the FII-to-DII ownership ratio falling below 1 for the first time to 0.98. "This marks a structural transformation of the Indian market,' said Pranav Haldea, MD of PRIME Database. "We have come a long way from 2015, when DIIs lagged FIIs by over 10 percentage points in shareholding. Today, India's capital market is increasingly driven by domestic capital and confidence." Together, DIIs, retail and HNI investors now account for 27% of the market, an all-time high. While retail and HNI participation dipped slightly this quarter, they remain a vital pillar of the market. Experts said the growing influence of domestic money marks a turning point for India's financial self-reliance reducing dependence on volatile foreign flows.
Economic Times
02-05-2025
- Business
- Economic Times
Self reliance! In a historic shift, DIIs' shareholding in Indian stocks is now higher than that of FIIs
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Popular in Markets In a historic shift, DIIs' shareholding in Indian stocks is higher that of FIIsIn a landmark shift for Indian capital markets, Domestic Institutional Investors (DIIs) have, for the first time, overtaken Foreign Institutional Investors (FIIs) in terms of their shareholding in NSE-listed companies . As of March 31, 2025, DIIs held a record 17.62% stake, surpassing FIIs at 17.22%, according to data from , an initiative of PRIME Database shift comes on the back of a massive Rs 1.89 lakh crore net inflow from DIIs during the March 2025 quarter, led by mutual funds which pumped in Rs 1.16 lakh crore, aided by strong retail flows through helped mutual funds cross the psychological double-digit mark for the first time, with their share rising to 10.35%, up from 9.93% in the December companies, led by Life Insurance Corporation of India (LIC), were also major contributors, investing ₹47,538 crore. LIC alone added ₹34,435 crore, pushing its share in NSE-listed companies to 3.72%, its highest level in five FIIs recorded a net outflow of Rs 1.16 lakh crore during the quarter, driven by concerns over rising US bond yields and a strengthening dollar. Their share in the market has now dropped to its lowest in 12 absolute value terms, DII holdings at Rs 71.76 lakh crore are now 2% higher than FII holdings, with the FII-to-DII ownership ratio falling below 1 for the first time to 0.98."This marks a structural transformation of the Indian market,' said Pranav Haldea, MD of PRIME Database. "We have come a long way from 2015, when DIIs lagged FIIs by over 10 percentage points in shareholding. Today, India's capital market is increasingly driven by domestic capital and confidence."Together, DIIs, retail and HNI investors now account for 27% of the market, an all-time high. While retail and HNI participation dipped slightly this quarter, they remain a vital pillar of the said the growing influence of domestic money marks a turning point for India's financial self-reliance reducing dependence on volatile foreign flows.
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Business Standard
02-05-2025
- Business
- Business Standard
DIIs overtake FPIs as dominant investors in Indian markets in March quarter
Domestic institutional investors (DIIs), mostly mutual funds and insurance companies, overtook foreign portfolio investors (FPIs) in ownership of NSE-listed companies in the March quarter of 2025. According to Prime Database, DIIs held a 17.62 per cent stake, up from 16.89 per cent in the December 2024 quarter. FPI ownership stood at 17.22 per cent. It is the first time DIIs have outpaced FPIs since Prime Database began tracking data in 2009. The value of DII holdings reached Rs 71.76 trillion, 2 per cent higher than FPIs. A decade ago, in March 2015, the ownership gap peaked at 1,032 basis points, with DII holdings valued at half of FPIs'. Since then, FPIs have steadily reduced their stakes in Indian equities. 'For years, FPIs have been the largest non-promoter shareholder category in the Indian market with their investment decisions having a huge bearing on the overall direction of the market. This is no longer the case. DIIs along with retail (individuals with up to Rs 2 lakh shareholding in a company) and high-net-worth individuals (HNIs) (more than Rs 2 lakh) investors have now been playing a strong countervailing role with their share reaching an all-time high of 27.10 per cent as on March 31, 2025. While FIIs continue to remain an important constituent, their stranglehold on the Indian capital market has come down,' said Pranav Haldea, managing director of PRIME Database Group. Domestic mutual funds also achieved a milestone in the March quarter, with their ownership in NSE-listed firms reaching 10.35 per cent — a double-digit figure for the first time. "Historically, FPIs have significantly influenced market movements with their inflows and outflows. However, their dominance is waning. DIIs, including mutual funds, insurance companies, and retail investors through systematic investment plans (SIPs), are providing a stabilising force against global volatility," said Trivesh D, chief operating officer of Tradejini. He noted that increasing local ownership is reducing market volatility. "As direct public and HNIs participate more, Indian investors are taking ownership of the market, making it less susceptible to FPI exits. Unlike FPIs, who can withdraw abruptly, DIIs tend to be more stable. This was evident in October 2024, when domestic investors absorbed over Rs 1 trillion in FPI selling, preventing market turmoil."
