Shareholders block grant of shares to Gokaldas Export MD Shiva Ganapati

Apparel maker Gokaldas Export’s plans to give generous stock grants to top management have been blocked by the company’s institutional shareholders, with more than half of them voting against a resolution to enable a modernized employee stock option plan (Esop). I cast my vote.

Four resolutions the company submitted for shareholder approval last month were rejected, according to a disclosure late Monday night.

One of the resolutions was for granting stock options in excess of 1% of the company’s issued capital to managing director Sivaramakrishnan Ganapati. According to the data, more than 37% of shareholder votes were against the special resolution, which required at least 75% approval for ratification.

Domestic institutional shareholders such as investment trusts and insurance companies hold 37.01% of the company’s shares. The data shows that the largest shareholders are SBI Magnum Global Fund (8.26%), Nippon Life India Trustee Limited (7.55%), and SBI Life Insurance Co., Ltd. (2.62%).

Global investment banking firm Goldman Sachs controls 6.8% of the company through two funds. Catamaran Ventures, the family office of Infosys co-founder Narayana Murthy, holds 1.47%.

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The other resolution that was rejected was for the granting of a new Esop pool of 2 million shares, representing approximately 2.7% of the company’s expanded capital base. Granting stock options to employees of subsidiaries. and tightening restrictions on the provision of loans, investments, and guarantees by company boards. INR100 billion.

Both proposals were special resolutions and required approval from 75% of shareholders. Only 62-63% of voters voted in favor of the resolution.

Gokaldas Export’s share price fell around 8 per cent on the BSE on Tuesday and Wednesday. The benchmark Sensex has fallen by about 0.8% during the same period. The company’s market capitalization at the end of Wednesday was INR733 billion.

Voting advisory company

Earlier, proxy voting advisory firm Institutional Investor Advisory Services (IiAS) advised investors to vote against the plan because the exercise price was at a significant discount to the stock’s market price. . The exercise price required a discount of up to 20% from the stock price at the time of grant.

The proxy advisor also opposed the potential concentration of stock options in Ganapashi under the plan.

“While we recognize that Mr. Sivaramakrishnan Ganapati is an expert and his skills have market value, his remuneration is dependent on the size and scope of the company,” IiAS said in a memo dated January 3. It is disproportionately expensive.”

Mr. Ganapati’s total compensation, including variable pay and stock options, for fiscal 2024 was lower. INR15 billion per IiAS. Proxy voting advisors pointed out that this amounted to almost one-tenth of the company’s consolidated pre-tax profit for the year. Mr. Ganapati’s compensation could be as follows: INR168 billion in FY2025, INRAfter analyzing the increase in remuneration over the past five years, IiAS was estimated at 222 billion yen in FY26.

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“We do not like such Esop schemes where allocations are biased towards the board or senior management. We believe in motivating and rewarding them,” the proxy voting advisor said.

Ganapasi did not respond to a text message seeking comment.

story of reversal

It is no wonder that Ganapati is credited with rebuilding Gokaldas exports. The company, which was once a Blackstone investment, has seen its stock price soar since private equity investors exited the company with an 84% haircut in 2017. Since Ganapashi took over as managing director in October 2017, Gokaldas Export’s share price has increased nearly 10 times.

Mr Ganapasi, a former chief operating officer at telecom operator Idea, is in charge of turning around the clothing export business after sluggish profits forced Blackstone to exit the investment after a decade of huge losses. In 2017, he took charge of Gokaldas Exports.

From FY2020 to FY2024, the company’s revenue grew at a compound annual growth rate (CAGR) of approximately 15%; INR240.9 billion. Profits grew at a CAGR of 88% during this period; INR131 million.

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Interestingly, the number of clothing items shipped during this period increased to 29.2 million units at a CAGR of just 4%, indicating a significant improvement in average realized value and profit margin. During this period, the company’s EBITDA margin expanded from 7.4% to 11.8%.

In February 2024, the company acquired knitwear manufacturer Matric Design in a cash and stock exchange transaction. INR489 million.