It’s a tricky decision whether or not to hold a stock when an excellent image is dashed by corporate governance issues. Investors in Cairn India are facing precisely this dilemma after the company came into the spotlight on July 23 for giving an $800-million loan (commitment for $1.25 billion) to promoter group company Vedanta. Cairn’s share price crashed 10.5% to Rs 308 following the news, raising fresh concerns over the Vedanta group’s corporate governance standards.
Nitin Tiwari, vice-president, institutional research, Religare, says, “Prima facie, it seems that shareholders’ permission was not taken and notice not given to the markets.” S Subramanian, managing director of proxy advisory firm Ingovern, seconds that thought. “The company has not even made a formal disclosure of this related-party transaction to exchanges. This shows disregard for fair disclosure by the company and merits a full-fledged investigation by Sebi,” he says.
It’s not the first time the Vedanta group has been e