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Does India need value-up or governance up?

by Anuja Agarwal, Research Head, Japan and India

6 December 2024

There has been much focus in Asia on regulatory initiatives like the “Value Up” programme in South Korea, Japan’s “Action Program” and similar initiatives recently announced in China. There is a growing interest whether Indian corporates need a similar push. However, India is a unique market with valuations generally driven by growth opportunities. Contrary to other Asian markets, concerns mostly revolve around high valuations which places these companies and their stocks at risk if the macro story doesn’t play out as expected.

Family-owned businesses in India contribute 75% to the country’s GDP, one of the highest percentages globally. This is likely to rise to 80-85% by 2047, according to a new study by McKinsey. The Ministry of Corporate Affairs (MCA) is the primary government body responsible for regulating corporate affairs in India. It administers the Companies Act, 2013, along with other related laws and regulations. Securities and Exchange Board of India (SEBI) regulates the securities market, overseeing public companies and ensuring investor protection through the Listing Obligations and Disclosure Requirements (LODR), 2015.

There has been increasing focus on ESG disclosures through Business Responsibility and Sustainability Reporting (BRSR) Core, as well as shareholder rights and board independence. While there have been recent allegations on weak corporate governance and lack of internal controls at the Adani conglomerate resulting in indictments in the US, we should be wary of tarring all corporates with the same brush. Some encouraging developments at the corporate level and regulatory action to note:

Nestle India’s parent company recently proposed increasing the royalty charge from 4.5% to 5.25%: the proposal had to be voted upon by minority shareholders. 57% voted against it, thereby showing shareholder votes matter.

Regulators took a stand was when minority shareholders rejected a proposal by Linde India which severely limited the company’s scope of operations while favouring those of Praxair India, although Linde and Praxair had merged globally. Upon receiving investor complaints that Linde India was effectively disregarding the result of the minority shareholder vote, SEBI appointed an independent valuer to ascertain the appropriateness of related-party transactions between Linde India and Praxair India, seeking to ensure that minority interests were protected.

The resignation of Godrej group scion as an independent director at VIP Industries was very transparent. Nisha Godrej in her resignation letter said: "Due to my differing view on leadership accountability and succession planning, I will be resigning from the Board effective June 3rd, 2024.”

SEBI required Embassy Office Parks Management Services Pvt Ltd to suspend Aravind Maiya from acting as its CEO and to appoint an interim CEO instead. Maiya was debarred for the maximum permissible period by the National Financial Reporting Authority (NFRA) for serious lapses; SEBI similarly took note of Maiya's gross negligence resulting in securities market fraud at Coffee Day Enterprises Ltd

Crompton Greaves’ recent special resolution for performance based stock units was rejected, an example of shareholder dissent over awards that a majority of investors were not comfortable with.

Zee Entertainment (ZEE) shares surged 8% after shareholders blocked Punit Goenka's reappointment as director. Despite challenges, including a failed Sony merger, Goenka remains CEO, focusing on ZEE's future growth.


SEBI has been proactive in considering the need of the hour. A good example is a recent study which reveals rising royalty payments by listed companies to related parties (RPs), highlighting lack of disclosure, perpetual payments and in half of the instances, listed companies that paid royalties either did not pay dividends or paid more in royalties to RPs than dividends to non-related party shareholders. 25% of firms paid royalties exceeding 20% of net profits, raising concerns that royalty payments were prioritized over transparency, governance and shareholder returns. ACGA members have previously engaged with Indian corporates on this topic; we are pleased to see the concerns raised in the SEBI study aim for best practices and are in line with our recommendations.

Certainly, all is not perfect, and more progress is needed on various corporate governance challenges in the country. The above examples, however, show advances on governance and shareholder votes making a difference. India does not face the structural and cultural challenges suppressing valuations; stock performance is more market driven rather than an area where government and regulatory policy is explicitly required. The question is not so much whether India needs a value up programme; more to the point, India needs better enforcement of governance regulations and greater escalation measures for minority shareholders given the promoter-led market landscape. Encouragingly, we see corporates adopting, and regulators enforcing, these at various notable companies.

About the Author(s)


Anuja Agarwal
Research Head, Japan and India, ACGA


Anuja Agarwal has joined ACGA to help in Advocacy and Research for Japan  and India. Anuja finished her MBA from IIMA in 2004 and joined BoFA in Hong Kong. She worked successfully on sell side as a derivatives prop trader and made markets for vanilla and exotic derivatives. She had a break from Wall Street with three young kids and ran a small startup on financial literacy where she was featured on Forbes, SCMP, Radio HK. Since 2016 she joined a multimanager quant fund and since then has worked in senior buyside roles at funds. She is passionate about integrating ESG strategies with fundamental views and has experience in PRI Disclosures, Stewardship and Proxy voting. She has been a mentor for Amber Foundation, 100WF and a Board advisory for a reusable cutlery company Recube.hk. She is a ESG CFA certificate holder and a Talent4Impact Fellow. She is a fitness freak and has completed Greenpower (50k), Moon trekker (42k), UNICEF (20k) races.

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