Shareholders block Gokaldas Exports from awarding shares to MD Siva Ganapathi

Clothing maker Gokaldas Exports’ plan to offer generous stock awards to its executives has been blocked by the company’s institutional shareholders, with more than half of them voting against the resolution to launch its latest employee stock option plan (Esop).

Four resolutions the company submitted for shareholder approval last month were rejected, according to disclosures late Monday night.

One of the resolutions involves granting stock options exceeding 1% of the company’s issued capital to managing director Sivaramakrishnan Ganapathi. Data showed that more than 37% of shareholders voted against the special resolution, which requires at least 75% support to be approved.

Domestic institutional shareholders such as mutual funds and insurance companies hold 37.01% of the shares. Data shows that the largest shareholders are SBI Magnum Global Fund (8.26%), Nippon Life India Trustee Ltd (7.55%) and SBI Life Insurance Co. Ltd. (2.62%).

Global investment banker Goldman Sachs controls 6.8% of the company through two funds. Infosys co-founder Narayana Murthy’s family office Catamaran Ventures owns 1.47% stake.

ALSO READ | Indian companies are sitting on mountains of cash – will shareholders be rewarded?

Other vetoed resolutions related to the granting of a new Esop pool of 2 million shares, representing approximately 2.7% of the company’s expanded capital base; the granting of stock options to subsidiary employees; and the increase in the company’s board of directors’ lending, investment, and guarantee limits. $10 billion rupees.

All resolutions are special resolutions and require 75% of shareholders’ votes to be approved. The resolution received only 62-63% of the votes in favor.

Shares of Gokaldas Exports fell nearly 8% on the Bombay Stock Exchange on Tuesday and Wednesday. The benchmark Sensex fell about 0.8% over the same period. As of Wednesday’s close, the company’s market capitalization was $7,330 Crores.

agency consulting firm

Earlier, proxy advisory firm Institutional Investor Advisory Services (IiAS) advised investors to vote against the plan because the exercise price represents a significant discount to the stock market price. The exercise price strives for a discount of up to 20% from the stock price at the time of grant.

The proxy adviser also objected to the potential concentration of stock options in Ganapati under the plan.

“While we recognize that Sivaramakrishnan Ganapathi is a professional whose skills have market value, his compensation is excessive relative to the size and scale of the company’s operations,” IiAS said in a Jan. 3 report.

Ganapathi’s total remuneration (including variable pay and stock options) for FY24 was less than $150 million under IiAS. That’s almost one-tenth of the company’s consolidated pre-tax profits for the year, proxy advisers noted. Ganapati’s salary could be as much as $168 million in FY25 $IiAS, after analyzing his salary growth over the past five years, estimated it at Rs 22.2 crore in FY26.

ALSO READ | Bold expansion, mixed returns: Are Nifty50 giants delivering returns for shareholders?

“We do not favor employee stock ownership plans where allocations are biased toward the board of directors or senior management. We believe that employee stock ownership plans should incentivize and reward employees at large, rather than unduly benefiting a small group of senior executives,” the proxy advisor noted.

Ganapathy did not respond to a text message seeking comment.

reversal story

It is no exaggeration to attribute the turnaround of Gokaldas Exports to Ganapathi. Shares in the former Blackstone investment firm have soared since private equity investors exited the company at an 84% discount in 2017. Shares of Gokaldas Exports have risen nearly tenfold since Ganapathi took over as managing director in October 2017.

Ganapathi, formerly chief operating officer of telecom operator Idea, was appointed in 2017 to take the helm of Gokaldas Exports, which turned its garment exports around after revenue stagnated, forcing Blackstone to exit after a decade of huge losses. investment.

The company’s revenue grew at a compound annual growth rate (CAGR) of nearly 15% between FY20 and FY24 $2,409 Crores. During this period, profits grew at a CAGR of 88% to $1.31 billion rupees.

and read | India expects more startups to cash in on employee stock ownership plans through pre-IPO and secondary transactions in 2024

Interestingly, shipments of apparel products grew at a CAGR of only 4% during this period, reaching 29.2 million units, indicating a significant improvement in average realization rates and profit margins. During the period, the company’s Ebitda margin expanded from 7.4% to 11.8%.

In February 2024, the company acquired knitwear manufacturer Matric Design in a cash-for-stock transaction valued at $489 crores.