Niranjan Hiranandani has resigned as Chairman of the London AIM-listed Hirco Plc amidst CBI looking into allegations of irregularities in the handling of employees’ provident funds for his Indian companies. Hiranandani citing corporate governance issues had offered to resign earlier but Hirco’s institutional investors like HSBC and Standard Life had refused to accept his resignation.
In an interview with CNBC-TV18, Niranjan Hiranandani, MD, Hiranandani Group gave his perspective on the development.
Excerpts from What’s Hot on CNBC-TV18 Watch the full show »
Below is a verbatim transcript. Also watch the accompanying video.
Q: How is it that the investors finally agreed and what does this mean for Hirco now considering the main face behind that investment vehicle is no longer involved in active management?
A: I do not know. You will have to ask them that question. But I think the time has really come where a lot of issues will have to be answered by Hirco Plc in terms of how to take things forward. Because of the AIM listing there are issues in terms of liquidity of the shares of Hirco Plc. There is a question of whether there will be a merger of the interest of the shareholders of Hirco Plc and also the land owning companies which the family is holding.
At this critical point of time it is in the best governance position that I should really step down because what really happens is when the negotiations finally come up in terms of a merger position with the family as well as with Hirco Plc. It is a little embarrassing for me to be on both sides of the coin. One being representing the family and B) representing all the shareholders.
So I think a good professional chairman and director would be in the best interest of the investors of Hirco Plc. So I think it was a right time and opportune time to do so.
As you know, the CBI case was more than two years ago and at that point of time the question was Rs 168 crore and now it is Rs 8 crore in respect of my sub-contractor and not liability of my parent company. So things have changed. But I think the future is what Hirco has to see. I think it looks very bright.
Q: In September this year, your daughter Priya Hiranandani was also sidelined by the board. Now you have stepped down. So no one from the family is involved in the active management of Hirco?
A: Yes. But Hirco Plc is an investment company. At the operational level in the companies, in the property companies at the ground level, we are still stakeholders and that will continue to be. So as far as the projects are concerned Hiranandanis are definitely sill involved in the project companies. It is only in the investment companies of the AIM listing, which is investment into the project companies that we have resigned.
Q: But how much of a stake do you still hold in that investment company?
A: At the investment companies the family holds only 3%. But we have an overflow right of over 60% and at the investment companies in terms of the corporate we also hold stake in terms of the property companies which we hold in India through the bulk companies.
Q: Do you have any specific plans for your stake in Hirco at the moment?
A: No. We have been discussing these issues in the last one year. As you know, there was a possibility of a merger which was being considered by the board as well as by the family but this did not materialize because there was an activist shareholder in terms of Laxey which actually because of them the merger proposal was shot down. Maybe that issue will come up again.
But at this point of time I think it will be a proper governance issue in terms of the family as well as Hirco Plc that they are represented independently and I think what is going to be is quite interesting who this matter pans out both in terms of Hirco Plc and also the family interest.
Q: You do not feel a similar pressure here. I know you are not a listed entity here in India but given this corporate governance issues and also if you could tell us what is the status of that CBI case now?
A: The CBI case has now panned out and the bail application that was made by me, the CBI has stated very clearly that there is no liability whatsoever of a single rupee for the provident fund of my own employees. Secondly, they have stated that there is a liability as a principle employer for my contractors of the extent of Rs 9 crore.
We all know that there were various judgments wherein the principle employer would not be liable especially in the period of 2003 and 2006 due to various judgments which we have contested. We are very clear that we are going to come out clean.
But this is obviously being contested by the CBI and until the final judgment does not come out I do not get final clearance from them. So we are pleased that at least the first part of it has being cleared up. And the fact that not a single rupee of liability of my own employee is there I think we are in a far better position than 2008 in terms of clearing our image and our position. I think most of the people have accepted the fact that we were really not liable at all.