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Institutional investors reject Nykaa parent’s attempt to amend AoA, Retail News, ET Retail

Institutional investors reject Nykaa parent's attempt to amend AoAInstitutional investors in newly-listed unicorn FSN E-Commerce Ventures, the parent of Nykaa, have rejected proposed changes to the company’s Articles of Association (AoA) that sought to give special rights to promoters to nominate one-third of the directors and the chairperson of the board irrespective of their shareholding.

As many as 79.4% of Nykaa’s institutional investors voted against the resolution that sought changes to Article 114 (a) and Article 134 of the AoA, according to the results of the postal ballot published by the company.

However, the resolution was passed as 100% of promoters and public non-institutional shareholders voted in favour. Promoters hold a 52.56% stake in the company, while institutional investors, including foreign portfolio investors and domestic mutual funds, hold 9.15%. Retail has about 13% stake while private equity firms and others have the rest of the holding.

As per the previous AoA, the promoter group had the right to nominate up to 50% of the directors on the board if they held in excess of 25% of the company’s paid-up share capital. The company proposed that promoters Falguni Nayar, Sanjay Nayar, the Falguni Nayar Family Trust, and the Sanjay Nayar Family Trust will have the right to nominate up to one-third of the number of directors as long as they are classified as promoters irrespective of the percentage of their shareholding in the company. The company has also proposed having the right to nominate the board’s chairperson without any minimum shareholding threshold.

Shares of FSN E-Commerce, which have plunged over 26% in the last one month, ended 7.75% lower at Rs 1,515.45 on the BSE on Monday, a day when the benchmark Sensex lost 3%.

An email query to the company asking why institutional investors opposed the resolution did not elicit any response till press time.

While recommending to vote against the resolution, proxy advisory firm Investors Advisory Services said that the right to nominate up to one-third of the directors on the board and the right to nominate chairperson of the board should be linked to their shareholding in the company.

In September last year, Zomato‘s resolution on the employee stock option plan failed to get a nod from the majority of its institutional investors. As many as 61% of the food aggregator’s institutional investors voted against ratifying the Zomato ESOP Plan. In both instances, the relatively low institutional holdings ensured that the resolutions were carried.

“The Nykaa and Zomato voting pattern speaks of the disconnect between private equity investors and market investors,” said Amit Tandon, MD, Institutional Investors Advisory Services.

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