Shareholder nay to related party transactions may jeopardise Kalyani Group firm
Subscribe to enjoy similar stories. The minority shareholders of the Kalyani Group company Automotive Axles Ltd (AAL) have rejected related party transactions with Meritor HVS India Ltd (MHVSIL), potentially disrupting its operations. This decision was influenced by concerns raised by proxy advisory firms about transparency and potential erosion of shareholder value.
Supply to MHVSIL constitutes approximately 80% of the sales of AAL, which manufactures axles, suspensions and brake assemblies. MHVSIL then distributes these components to automotive companies. The rejection of the proposal could potentially disrupt AAL's operations and impact its future growth.
The company will now need to explore alternative arrangements to ensure a smooth supply of components to its customers. Keeping distribution in a separate firm was depriving minority shareholders of AAL of the margins earned from the sale of these components, said proxy advisor Institutional Investor Advisory Services India Ltd (liAS). There was also a lack of transparency regarding pricing and a lack of information on the benefits accrued to the two partners from the arrangement, Stakeholders Empowerment Services (SES) said in its report.
The Kalyani Group did not respond to Mint’s emails seeking comment sent on Tuesday evening. AAL is a listed joint venture company of US’ Cummins Inc and India’s Kalyani Group, with both partners controlling a 35.52% stake each. Public shareholders of the company include Nippon Life India mutual fund (8.81%) and SBI Contra Fund (2.38%).
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