LIC likely to back board decisions

MUMBAI: Life Insurance Corporation (LIC), the largest institutional investor in the Tata Group with stocks worth about Rs 37,000 crore, is unlikely to go against board resolution of the companies in which it holds stakes. This is in keeping with the institution's policy of supporting the management although the life insurer has substantial minority stakes in Tata Steel (13.6%) and Tata Power (13.1%). In case of any board room battle, LIC's support might turn out to be crucial in these companies since Tata Sons holds 31.35% in steel major and 33.01% in the automobile maker. LIC also holds 9.8% in Tata Global Beverages, 8.8% in Indian Hotels and 7.1% in Voltas.

Historically, LIC has played a passive role in promoter-led companies and has been relatively more active in professionally managed companies without any identifiable promoter such as L&T, Axis Bank and ITC. According to top-level sources in the corporation, LIC might informally consult with the government on the Tata issue. However, there has been no indication from the government that it wants LIC to take an activist stance.

Despite having a large stake, LIC does not have a board position in most of the companies. However, former LIC chairman D K Mehrotra is on the board of Tata Steel. "LIC has been historically against disruption of management and typically supports the incumbents," a top official said.

LIC acting chairman V K Sharma was one of the few institutional investors that Ratan Tata had met after the ouster of Mistry. Sharma is currently holding charge until the government names a successor to S K Roy who abruptly resigned a few months ago. In all likelihood the successor will be Sharma himself.

Indian institutions had not interfered even in the '90s when Ratan Tata consolidated his control over the group by ousting the satraps in leading group companies including Russy Mody at Tata Steel, Ajit Kerkar at Indian Hotels and Darbari Seth at Tata Chemicals.