Mutual funds as responsible investors

By Sawant Singh and Arun Madhu, Phoenix Legal

Globally, there exists a long list of fund houses which are so called “activist investors”. The “activism” is often a reference to either the changes in the management and operations of a company, which the fund houses would like to bring about, or the active participation by such funds in the key decisions of a company, through the exercise of their votes. The end objective of such activism has typically been to ensure that shareholders’ interests (especially the minority) are protected and the highest standards of corporate governance are maintained and as a by-product ensure that the unit holders’ interests are protected or enhanced.

Sawant Singh Partner Phoenix Legal
Sawant Singh
Phoenix Legal

Current state of affairs

Apart from the odd example, India and Indian companies do not have a history of activist institutional investors and have not really tasted the sting of a fund’s activist behaviour.

A notable example of institutional investor activism in India is the case of Satyam Computers Services. What most people remember about the infamous Satyam scandal is that the company initially shot into the news because of the failed acquisition of two companies run by the sons of the Satyam promoter (100% stake in Maytas Properties and 51% stake in Maytas Infrastructure), but the reasons for the failure of the acquisitions are often overlooked. After all Satyam was forced to stall its plans only because of the stiff opposition it faced from its institutional investors. If fund houses such as Templeton and SBI Mutual Fund had not opposed the acquisitions strongly, it is likely that the Satyam scandal would never have surfaced.

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Sawant Singh is a partner and Arun Madhu a senior associate at Phoenix Legal in Mumbai. They can be reached at and


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