Italian stationery and art supplies manufacturer Fabbrica Italiana Lapis Edfini Spa (FILA) is one of the promoters. Another group of promoters based in India include Santosh Raveshia, Sanjay Rajani, Ketan Rajani and Chandni Somaiya. The two promoters collectively own 70.39% of the company’s shares.
However, the three agency consulting firms recommended that shareholders vote against the three resolutions proposed by the firm that would include the pre-promotional public offering (IPO) agreement between their promoters to include in their association’s work.
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If approved, these resolutions will effectively enable the company’s Indian sponsor to appoint a managing director, its Italian sponsor FILA to appoint a chair and allocate its rights to appoint various board committees among them. The promoters will also own the board nomination corresponding to their shares.
The company can also expand its board of directors to up to 20 directors. Currently, it has 12 directors, four of which are independent.
The Indian company will grant FILA exclusive rights to distribute its products in export markets already owned by the Italian company as part of the company’s shareholder agreement approved by the company for shareholders. Meanwhile, DOMS will have the exclusive right to distribute FILA products in India, Nepal, Bhutan, Sri Lanka, Bangladesh, Myanmar and the Maldives.
Finally, FILA will access financial and non-financial information from the DOMS industry every month.
Agency consulting firm Ingovern, Institutional Investor Consulting Services (IIAS) and Stakeholder Authorization Services (SES) recommend that shareholders vote on three resolutions proposed by the stationery company, citing corporate governance concerns.
In a report released this month, Ingovern stated: “As best practice for governance, we recommend that the chairman of the board should be an independent director. We do not support the terms that allow the sponsor to nominate the chairman.”
Meanwhile, it said that the appointment of the managing director should be consulted with the Nominations and Remuneration Committee, which consists of only independent directors. It said it should not be an exclusive privilege for Indian sponsors.
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Acting consultant IIAS noted in its report that the clause allows DOMS to exclusive distribution rights for FILA in products produced in export markets, in which the clause has “limited the company’s future export and profitability” in its report.
Pre-IPO Agreement
Doms Industries said these agreements with FILA existed before its IPO but must be terminated during the listing process.
Sebi (SEC) said we reached this agreement with FILA. However, the Securities and Exchange Commission of India said we must terminate the agreement and renew the mailing in shareholder approval. That’s what we’re doing right now,” a spokesperson for the company said.
SES said companies of all sizes have about nine board strength. Currently, DOMS’s board of directors is composed of twelve directors – four executive directors, four non-executive non-independent directors and four independent directors.
“For SES, it appears that the increase proposed has been cancelled with any requirement of the company. Instead, this appears to be a provision for the provision of the “special rights” clauses contained in the (shareholder agreement, shareholder agreement, agent advisor company pointed out (shareholder agreement).
A DOMS spokesman said the company hopes to increase the size of its board to accommodate the non-independent chairperson appointed by Fila. Having a non-independent chair would allow the company to have half of its board members independent of the law.
The company hopes that a larger board of directors will accommodate eight independent directors, which will put its general board of directors to 16, which is higher than the 15 currently allowed by its association’s charter.
Fila, an Italian stationery and art supplies manufacturer that invested in DOMS in 2012, currently holds a 26.01% stake in the company. The company’s Indian promoter controls 44.37%, bringing the total equity of the promoter to account for 70.39%.
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A special resolution proposed by the company will require at least 75% of shareholders to be approved. A negative judgment from an agency consulting firm could jeopardize the company’s plan to return to its pre-status status quo. Control companies have approximately 25.72% of institutional investors such as mutual funds, insurance companies and foreign funds rely on the votes of proxy consultants.
The electronic vote for the resolution begins on March 27 and will end at 5 p.m. on Friday, April 25.
“The company has been implementing strategic initiatives over the past few years and these efforts are expected to yield results in the coming year,” analysts at Axis Securities said in a February 5 note. Key initiatives include a focus on operational efficiency, from a focus on pencils, investments in Greenfield manufacturing facilities and investments in expanding its distribution channels.
DOMS Industries shares rose 3.9% on Tuesday ₹3,010. The stock rose 66% last year, while benchmark Sensex grew at 8% over the same period. The company is known for its pencils ₹18.266 million.
