TCS, India’s largest software services company, will seek shareholder approval on May 31 for related party transactions (RPTs) worth over Rs 8,000 crore with its promoter Tata Sons and its subsidiaries. The move comes in compliance with the new Securities and Exchange Board of India (Sebi) rules that require a company to seek shareholder approval if the value of such transactions exceeds Rs 1,000 crore or 10% of its consolidated turnover.
In its notice to shareholders, TCS disclosed that its RPTs with Tata Sons and its arms, which include Tejas Networks, Tata Motors, and Jaguar Land Rover, stood at Rs 8,336 crore in FY24. These transactions have raised concerns among investors and corporate governance experts due to their potential for conflicts of interest between TCS and its promoter group entities. Therefore, seeking shareholder approval ensures transparency and accountability in the company’s operations.
The significance of shareholder approval lies in safeguarding the interests of minority investors, who may be affected by related party transactions. By allowing shareholders to vote on these transactions, it ensures that such deals are in the best interest of the company and its stakeholders.
TCS, being a prominent player in India’s IT industry and part of the Tata Group, has always been subject to scrutiny regarding corporate governance practices. The company has often taken proactive measures to address these concerns and maintain transparency in its operations. Seeking shareholder approval for related party transactions is yet another step in this direction.
The outcome of the shareholder vote will determine the fate of these transactions. If approved, it will provide the necessary validation for TCS’s dealings with Tata Sons and its subsidiaries. However, if rejected, it may lead to a reassessment of the transaction terms or potential restructuring to address the concerns raised.
Overall, TCS’s decision to seek shareholder approval for related party transactions is a positive step towards enhancing corporate governance practices and reinforcing stakeholder trust. It reflects the company’s commitment to transparency, accountability, and maintaining the highest standards of ethics and integrity in its business operations.
Source: Times of India
