Ahead of AGM, InGovern red-flags governance concerns at TD Power Systems

Promoters offload 24% equity amid shareholding dispute

InGovern Research, a voting advisory firm, has red-flagged governance concerns at TD Power Systems, an electrical equipment maker, ahead of its annual general meeting (AGM) to be held on Wednesday.

InGovern has recommended shareholders seek more explanation from the Bengaluru-based company over the ongoing ownership dispute between the promoter group and Vijay Kirloskar, who set up the company in 1999.

Last month, the Karnataka High Court (HC) restrained the chairman of TD Power System and several others from transferring shares of the company following a petition filed by Kirloskar.

Kirloskar, who is chairman of Kirloskar Electric Company, claims ownership of 25.1 million shares, representing 16.1 per cent equity of TD Power.

“The company should immediately take steps to disclose full and complete facts to its shareholders prior to the AGM regarding the commercial suit filed by Vijay Kirloskar and others against Mohib Khericha, Nikhil Kumar, the company and other promoters…before the High Court of Karnataka and the ad-interim order dated 12th July, 2023,” InGovern’s report said.

The voting advisory firm said that TD Power’s director’s report does not mention the ongoing suit filed by Kirloskar.

The company made stock exchanges disclosures on the matter on July 14 and 21, which InGovern says were "not complete."

Meanwhile, amid the shareholding dispute, TD Power’s promoters offloaded nearly 24.2 per cent shares of the company via block deals on June 30.

Seven individuals and entities sold a total of nearly 37.7 million shares at Rs 221 apiece to mop up Rs  832.7 crore, data provided by stock exchange showed.

The shares were picked up by marquee institutional investors such as Aditya Birla Sun Life Mutual Fund (MF), HDFC MF, ICICI Prudential MF and Quant MF. 

Following the share sale, the promoter holding in the company has dropped from 58.45 per cent to 34.3 per cent.

InGovern has asked TD Power’s minority investors to seek clarity on a host of issues during the AGM. This includes the “reason for the offloading of such a large percentage of promoter shares by way of a block deal" and “whether the promoters offloaded their shares in the company since they had doubts about the company’s future growth/ prospects.”

An email sent to TD Power didn't elicit a response immediately.

InGovern has recommended that TD Power appoint an independent auditor to conduct a forensic audit into the affairs of the company and the conduct of its boards.

It has also recommended TD Power expand its board size from six at present to anywhere between 7-15, as “board size outside of this range is considered less effective due to a low diversity” it believes.

Further, the proxy advisory firm has recommended an ‘against’ vote on the resolution pertaining to the reappointment of Khericha as director, citing historical cases against him.

Khericha, who also operates the investment banking firm Chartered Capital and Investment, has faced scrutiny from Securities Exchange Board of India (Sebi) in the past for lapses in handling IPOs and buybacks.