AD FOR COAL INDIA
“The hedge fund’s arguments are progressive for a change,” says Kotak Institutional Equities analyst Murtuza Arsiwalla who concurs that a higher profitability for Coal India is eventually beneficial for the people of India, as they own 90 per cent of the company and still protect the interests of minority shareholders. “They are right in being concerned about the impact on dividend, but they have no right to be dictating terms on the country’s policy,” says a top official in Coal India.
Hohn is sure to fight tooth and nail. He is not as interested in money as in his desire to be proven right. “He likes to win arguments, and the money is simply evidence that he won,” wrote
The Economist, referring to the cases he has fought in the past. Son of a Jamaican car mechanic, he met his wife American-born Jamie Cooper-Hohn while studying at Harvard Business School. He is famous across Europe as a new age venture philanthropist—applying venture capital concepts to charity. He has structured TCI in such a way that every year it automatically donates 0.5 per cent of profits of the fund’s assets to his wife’s charitable organisation, The Children’s Investment Fund Foundation ( TCIF). The organisation focuses on improving the lives of poor children in Asia and Africa.
If TCI loses, analysts fear it could pull out, like it has done in the past in other companies where it has taken the battle to the management. In 2009, TCI was responsible for the biggest single sell-down by a foreign institutional investor when it liquidated its stock in eight banks in its portfolio—bank of Baroda, Punjab National Bank, Union Bank of India and others—which amounted to Rs 3,113 crore. At present, it does not have more than 1 per cent stake in any Indian company other than Coal India. This is a situation best avoided. “Buyers will be harder to come by, given overhangs of government policies and stagnant production levels,” believes D.K. Aggarwal, CMD of SMC Investments and Advisors.
But if it wins, it could set a precedent. “Any outcome in favour of TCI may embolden other investors to file suits against promoters and directors of errant companies,” says Shriram Subramanian, founder and managing director of In govern, that does corporate governance research.
So far, it has already managed to instigate other independent directors to object to the FSAS and ensure a minimum 0.01 per cent penalty as well as several escape clauses in the draft. “Coal India is by far the best investment opportunity in India. It is a sleeping monster,” Veldhuijzen said in an interview to Bloomberg in July 2011. Will Hohn manage to wake it up?