Shareholders block Gokaldas Exports’ stock grant to MD Siva Ganapathi | Company Business News

Apparel maker Gokaldas Exports’ plan to reward its top executive with a generous stock grant has been blocked by the company’s institutional shareholders, more than half of whom voted against the resolution enabling its latest employee stock option plan (Esop).

According to disclosures made late Monday evening, the company’s four resolutions submitted for shareholder ratification last month were defeated.

One of the resolutions concerned granting stock options in excess of 1% of the company’s issued capital to managing director Sivaramakrishnan Ganapathi. Data show that over 37% of shareholder votes were against this special resolution, which required a minimum 75% approval to be ratified.

Domestic institutional shareholders, such as mutual funds and insurance companies, own 37.01% of the company. The largest shareholders are SBI Magnum Global Fund (8.26%), Nippon Life India Trustee Ltd (7.55%) and SBI Life Insurance Co. Ltd. (2.62%), as shown by the data.

Global investment banker Goldman Sachs controls 6.8% of the company through two funds. Infosys’s co-founder, Narayana Murthy’s family office, Catamaran Ventures, owns 1.47%.

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The other defeated resolutions concerned granting a new Esop pool of 2 million shares, amounting to about 2.7% of the company’s expanded capital base; granting stock options to employees of subsidiary companies; and enhancing the limit for the company’s board for giving loans, making investments, and providing guarantees by ₹1,000 crore.

All the proposals were special resolutions requiring 75% shareholder votes in favour to be ratified. The resolutions received only 62-63% favourable votes.

Gokaldas Exports’ shares lost almost 8% on the BSE on Tuesday and Wednesday. The benchmark Sensex has lost about 0.8% over the same period. The company’s market capitalization at the end of Wednesday was ₹7,330 crore.

Proxy advisory firm 

Earlier, proxy advisory firm Institutional Investor Advisory Services (IiAS) had advised investors to vote against the plan because the exercise price was at a steep discount to the stock’s market price. The exercise price was sought to be at a discount of up to 20% to the stock price at the time of granting.

The proxy advisor also objected to the potential concentration of stock options with Ganapathi under the plan.

“While we recognise that Sivaramakrishnan Ganapathi is a professional and his skills carry a market value, his compensation is disproportionately high for the company’s size and scale of operations,” IiAS had said in its note dated 3 January.

Ganapathi’s FY24 aggregate remuneration, including variable pay and stock options, was under ₹15 crore, per IiAS. The proxy advisor noted that this was equivalent to almost a tenth of the company’s consolidated profit before tax that year. Ganapathi’s remuneration could go up to ₹16.8 crore in FY25 and ₹22.2 crore in FY26, estimated IiAS after analyzing his compensation growth over the past five years.

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“We do not favour such Esop schemes where the distribution is skewed towards the board or senior management. We believe Esops should motivate and reward a broad base of employees rather than disproportionately benefiting a small group at the top,” the proxy advisor noted.

Ganapathi did not respond to text messages seeking comment.

The turnaround story

Crediting Ganapathi for the turnaround of Gokaldas Exports would not be a stretch. The former Blackstone-investee company has seen its stock price skyrocket since the private equity investor exited in 2017 with an 84% haircut. Gokaldas Exports shares have gained nearly tenfold since Ganapathi took charge as the managing director in October 2017.

Formerly the chief operating officer of telecom operator Idea, Ganapathi was brought at the helm of Gokaldas Exports in 2017 to knit a turnaround at the garments exporting after its revenues stagnated, forcing Blackstone to exit its investment after a decade at a steep loss.

Between FY20 and FY24, the company’s revenues grew at a compounded annual growth rate (CAGR) of almost 15% to ₹2,409 crore. Profit rose at a CAGR of 88% during this period to ₹131 crore.

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Interestingly, the number of clothing articles shipped during this period grew at a CAGR of just 4% to 29.2 million units, indicating a sharp improvement in average realizations and margins. During this period, the company’s Ebitda margin expanded to 11.8% from 7.4%.

In February 2024, the company acquired knitwear maker Matric Design in a cash and share swap deal valued at ₹489 crore.