Can TCI go beyond the letters?

The government has grown a thick skin and even the share prices are not very sensitive anymore

TCI, the UK-based hedge fund, has become the official letter writer of India. In the past one year, it has written letters to the two different chairpersons of Coal India, its directors, independent directors, Alok Perti, the coal secretary, the coal minister and now finally the prime minister. While the addressees have changed over the months, the contents have largely remained similar, if not same.

Typically, these letters are shrill in tone, spicy in language and take extreme positions. It uses the key words such as corruption, FSAs and underpricing of coal. It also accuses the board of directors of the miner of failing in their fiduciary duties and harming minority shareholders. While initial days the letters had the potential to raise shock and awe, a fatigue has already set in.

Officials have stopped taking them seriously. A couple of months ago, one of them even suggested that TCI was free to sell and go away. Even media, where the letters and threats to sue had been given prominence, has pushed the story behind.

Though TCI invoked the bilateral treaty and even initiated a class action suit of sorts in Calcutta High Court, it has not been able to make much headway.

All the letter-writing and releasing these to the press often even before these reach the addressees has what investors call “optical value”, but its actual value is diminishing and diminishing fast. One barometer of the impact of these letters is the price of the shares. Coal India shares have reacted much more to the imminent supply in the form of disinvestment than to the latest letter to the Prime Minister.

The disinvestment itself is likely to snatch away from TCI, the status of the second largest shareholder in the company. At present, it holds about 1.01%. But when 10% is offloaded, unless it pumps in more money into the hands of the largest shareholder—the government – with which it has had so many problems with, TCI is unlikely to remain the second largest investor in Coal India.

Though one can identify the principles TCI is fighting for and its zeal to up hold the rights of the minority, its strategy of name and shame has run its course. It has to come up with something new, it has to invent a more potent weapon. A weapon – that evokes shock and awe – like the first TCI letter did in March 2012.