Not such a fair wind for Fowle - Review of Vedanta AGM

Not such a fair wind for Fowle

Nostromo Research

London July 30 2004

Photographs of the AGM & demonstration can be viewed here

The name, in Hindi, means "the end of knowledge". Yesterday it was more like the end of proper understanding, as Vedanta held its first annual general meeting (AGM) in London.

First, the company was nearly hoisted by its own petards. Two directors up for re-election didn't attend; one with the feeble excuse that he had another meeting in Pune the following day.

Then, chairman Michael Fowle admitted he shouldn't after all be chair - though whether of the audit committee or the company, was left to speculation. UK corporate best practice states clearly that you shouldn't head a company, while also in charge of assessing its governance But then Vedanta's corporate governance director, Mr Chandra, was already on that plane to Pune.

Worse, the company hadn't issued a health safety and environment report. Was there one? asked a canny shareholder. Well,there was an HSE committee and it had made a report but it wasn't worth publishing - just wait for another year. In any case, said Fowle, most HSE issues relate to Sterlite and it has its own system of reporting back home. In other words, you pays your money in London, while the tune is called in India.

Such insufferable complacency was very much the theme of Fowle's responses to protests from nearly half the non-staff shareholders present. Half? According to Vedanta's PR spokeswoman, of the thirty or so attenders at the meeting, a third was staff, another third represented investment institutions and the rest were shareholders. This means that the half dozen dissidents who entered the meeting on single votes may have comprised around fifty per cent of the AGM's voting caucus.

Not that this mattered one wit of course, since Anil Agarwal, architect of Sterlite Industries and Vedanta's CEO has, along with his kith and kin, more than enough shares to take the company to war on Pakistan if he chose, and without consulting anyone else.

Sterlite has been notorious in India since it was set up in the late eighties. Vedanta, its holding company has carried on the tradition. Its shares have lost around a third of their value since the launch last December. And the lack lustre performance was reflected in yesterday's reelection of directors. Nearly half a million votes opposed Agarwal himself. But, more surprising and indicative, it was Chandra who suffered the most damning inductment; nearly a fifth of the total number of votes going against him. According to the Financial Times the thumbs down probably came from US hedge fund, Ospraie, one of the largest "hidden" investors in Vedanta.

Two shareholders raised meek and meagre questions about the company's performance. But the floor was dominated by the dissidents - drawn from four UK NGOs. They were especially concerned about Vedanta's construction of a huger alumina refinery on tribal land in Orissa, and the blasting of the region's most sacred mountain, Nyamgiri, to provide the bauxite feed stock. Although the protestors were well-backed by personal knowledge of the area and its people, their testimony seemed hardly to ruffle the board. Fowle's persistent retort was: we get the permissions we need from the Indian states and central government and then we go ahead.

Such claims proved threadbare twenty years ago. Its a refrain from which the big extractive companies now - well, refrain, knowing that local jurisdictions are often corrupt or inadequate in oversight. But Vedanta doesn't care about best practice or, apparently, most of the principles to which other London resource majors, such as BHPBilliton, BP and Rio Tinto, claim to adhere.

Operations at Sterlite's most controversial and deadly single venture - the Tuticorin smelter also came briefly under the spotlight. Had the company expanded the plant without getting proper permission from the Tamil Nadu Polution Control Board, as local activists claimed this week? No sir, came Fowle's answer (with a placid Agarwal briefly nodding assent) - we've got that permit. And would the smelter release its huge burden of wastes from the site into the environment, as local people have consistently feared - and as indeed it was doing until recently? No sir, absolutely not!

Ironically the AGM took place at a leading London marine institute - ironic because the Tuticorin smelter was sited, in flat contravention of regulations, only a few kilometers from one of southern Asia's most precious biosphere reserves, the Gulf of Mannar. Although the directors slipped in through the back entrance, other attenders had to pass through a colourful picket, held on behalf of the local communities already damaged by the Orissa alumina project and now threatened even further by Sterlite/Vedanta's plans.

We can be sure that it won't be last demonstration that Vedanta or its complacent investors have to suffer.

Some Press Coverage of the Vedanta meeting is below:-

Fair play and Fowle

By Clay Harris, Financial Times

July 30, 2004

Michael Fowle, propelled into the chairmanship of Vedanta Resources by the departure of Brian Gilbertson, had a reasonably smooth time at the UK-listed Indian mining and metals group's inaugural annual meeting. Most questions dealt with the impact of activities of Sterlite, Vedanta's subsidiary, in the Indian states of Orissa and Tamil Nadu. Of Gilbertson, who left because of his potential involvement with Russian metals group Sual, Fowle said only: "[He] had a great deal of drive but decided that he would use that drive elsewhere." Gilbertson, meanwhile, was a guest of Russian Aluminium, Sual's rival, at a Bolshoi Ballet performance of Romeo and Juliet in London on Wednesday night. He was spotted chatting to Rio Tinto boss Leigh Clifford, his foe when Gilbertson headed BHP Billiton. A sector more like bosom buddies than Montagues and Capulets.

© Copyright The Financial Times Ltd

I wasn't too greedy says head of Vedanta

By Alistair Osborne, Daily Telegraph

30/07/2004

The chief executive of Indian mining company Vedanta Resources yesterday denied he had been too greedy when he floated the company in London last year.

Anil Agarwal, who owns 53pc of the group, said: "We are delivering on time the results we said we would deliver. That's what's in our hands. The float was a very long process that took almost a year, with 150 bankers, engineers and accountants coming to India. The price was set by the market."

The shares were floated at 390p last December, when Vedanta raised £507m, but have never been above that price, yesterday closing at 285.5p, up 5.5p.

Before the float, shares in its main Bombay-listed arm, Sterlite Industries, shot up in thin trading.

Mr Agarwal was speaking after Vedanta's first annual meeting, attended by a dozen shareholders, none of whom asked about the share price.

Chairman Michael Fowle was asked if Vedanta would get a "transfer fee" for allowing previous chairman Brian Gilbertson, who was paid £7m at the float, to move to rival Russian miner Sual. "Transfer fees have not yet hit the City of London," he replied. Otherwise, he said: "It was a jolly boring meeting like all the best meetings." There was a protest vote by a fifth of the minority shareholders against the re-election of director Naresh Chandra, who is 69.

Outside the meeting, campaigners protested against the construction of a bauxite refinery in Orissa, India, on land that is sacred to local tribes.

Financial Times; July 30, 2004

With chief executive Anil Agarwal's family company, Volcan Investments, holding 53.8 per cent, every vote at Vedanta Resources was a fait accompli. But two resolutions - the re- election of non-executive Naresh Chandra and the routine authority to allot shares for cash - attracted a surprisingly large negative vote, most likely from US hedge fund Ospraie.