Manappuram Fin seeks additional rights for some investors

Manappuram Finance is in the spotlight once again and this time over affirmative rights. It wants to retrospectively amend its articles of association (AOA) to accommodate institutional investors who subscribed to its issue of cumulative convertible preference shares in 2008. CNBC-TV18’s report Sajeet Manghat and Sandeep Srikanth report that this move has rubbed institutional advisory firm IIAS the wrong way.

Mannapuram Finance wants to favour some institutional investors over others, specifically, Hudson Equity Holdings, AA Development Capital India, Sequoia Investors, and GHI of Mauritius, to whom it issued 2.25 million CCPS in Nov 2008.
So it wants to retrospectively amend it's AOA to give these players affirmative rights. This is a move institutional investor advisory firm has asked shareholders to vote against.
Amit Tandon, Founder & MD, IIAS says, “They are giving certain rights to a bunch of shareholders and that is what we are objecting to."
The amendments also talk about preference to specific investors on the occurrence of liquidation prior to conversion of the preference shares. 
In addition, these investors will get rights like the right to appoint directors, protection of nominee directors to maximum extent possible and appointment of nominee directors on the board of all subsidiaries including presence of directors of AAIA and Hudson to complete quorum of board. This is also being opposed.
Amit Tandon says, "We believe all shareholders or all shares are pari passu with each other and therefore the rights should be the same. Now if you turnaround and say look before I declare a dividend I am going to take your approval or before I change auditors I am going to take your approval or the fact that as a shareholder you have the right to seat on the board in our mind is not correct. Incase those shareholders want a set of rights then they should go ahead and have a controlling stake in the company."
SP Tulsian, sptulsian.com says, "I think some of the points that they are incorporating in the articles of association in my view are not correct. If you want to protect the institutional right or you want to give them any rights as an institutional investor, I don’t think that those can really get incorporated in the articles of association for that you can have a separate shareholder agreement between the promoters and the institutional investors."
That is not all. The changes will mean Mannapuram promoters must take permission from AAIA and Hudson before they sell their stake.
The investors will also get the right of first sale and offer of shares of AAIA and Hudson.They will get the right to sell part or all shares either to the company and the promoters, or to the public via secondary offering.
Amit Tandon adds, "What we find interesting is one or two of the shareholders have actually being increasing there stake through public market purchases. These rights actually then rub-off on the additional shares that they have acquired , which again to our mind does not seem right."
When contacted by CNBC-TV18, Manappuram Finance managing director said the company is in silent period and hence cannot comment on the issue.