SES Opposes Six Proposals, While IiAS Clears All RPTs Ahead of March 13 Vote
Hyundai Motor India, one of India’s leading automakers, is facing divergent recommendations from proxy advisory firms regarding its related-party transactions (RPTs). While Stakeholders Empowerment Services (SES) has advised shareholders to vote against six of the seven proposals, Institutional Investor Advisory Services (IiAS) has given the green light to all.
The only RPT that SES supports involves Hyundai Motor Company (HMC), the South Korea-based parent entity. Shareholders have until March 13 to cast their votes on these transactions.
Hyundai’s Record-Breaking IPO and High-Value RPTs Under Scrutiny
Hyundai Motor India made headlines in October 2024 with its ₹27,870 crore initial public offering (IPO)—the largest in India’s history, surpassing Life Insurance Corporation of India’s ₹21,000 crore IPO.
However, its high-value related-party transactions are now under scrutiny, particularly one involving HEC India LLP. SES flagged concerns over a ₹3,000 crore transaction with HEC India LLP, an entity with fixed assets of just ₹11 lakh.
Other proposed transactions under SES scrutiny include:
- Kia India (Hyundai subsidiary)
- Mobis India Limited
- Hyundai Transys Lear Automotive India Pvt. Ltd. (HTLAIPL)
- Hyundai Motor De Mexico S DE RL DE CV
- PT Hyundai Motor Manufacturing Indonesia
Despite SES’s objections, IiAS supported all seven proposals, arguing that they were conducted at arm’s length pricing and in the ordinary course of business.
Hyundai Defends Governance Standards Amid Proxy Dispute
Responding to SES’s concerns, Hyundai Motor India asserted that another major proxy firm, IiAS, had fully endorsed all resolutions.
A Hyundai Motor India spokesperson stated:
“We are aware of the Stakeholders Empowerment Services (SES) recommendations, and we are of the view that this is an isolated opinion. Another reputed proxy advisory firm, Institutional Investor Advisory Services (IiAS), has shared a contrary opinion, favoring all seven resolutions and giving a clear go-ahead. Our commitment to the highest standards of corporate governance remains uncompromising, and we shall continue to uphold the interests of all stakeholders.”
SES Criticizes Lack of Scrutiny in High-Value Transactions
In its advisory note, SES raised concerns about the transparency and due diligence of Hyundai’s audit committee and board.
“Related-party transactions of such magnitude must require careful scrutiny, and SES research shows that proper scrutiny has not been done, nor proper disclosures made to enable shareholders to take an informed decision,” SES stated.
SES’s stance was reinforced by its analysis of HEC India LLP, which has minimal assets yet is set to handle a ₹3,000 crore contract.
The advisory firm questioned whether the audit committee and board had fulfilled their fiduciary duties, particularly in light of SEBI’s Master Circular on LODR disclosures dated November 11, 2024.
IiAS Defends Hyundai’s RPTs, Calls for More Clarity on HEC India LLP
IiAS took a contrasting stance, affirming that six of the seven RPTs adhered to standard business practices.
On the controversial ₹3,000 crore HEC India LLP transaction, IiAS noted:
- HEC India LLP is a subsidiary of an associate of Hyundai Motor India’s holding company.
- The firm specializes in automobile construction and has expertise in global standards, engineering, and design.
- Hyundai Motor India had already purchased capital goods worth ₹2.9 billion from HEC in FY24.
However, IiAS acknowledged that Hyundai should have provided a more detailed explanation for the sharp increase to ₹30 billion for FY26.
It linked the significant expenditure to Hyundai’s recent acquisition of the Talegaon plant in Maharashtra.
“The redevelopment of the Talegaon plant requires significant capital expenditure over a relatively short period. We assume that capital goods will be purchased from HEC for the redevelopment of the Talegaon facility. Hence, we support the resolution. We expect the company to provide granular details regarding the rationale for the proposed transaction with HEC,” the IiAS report stated.
Proxy Vote Outcome Could Influence Hyundai’s Corporate Governance Perception
With proxy advisors split on Hyundai’s related-party transactions, the final shareholder vote on March 13 will be crucial. The decision could impact Hyundai’s corporate governance reputation, particularly following its record-breaking IPO.
