0% found this document useful (0 votes)
46 views14 pages

CF1 Assignment Group 3 18.03.2024

Uploaded by

Rahatul Ashafeen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
46 views14 pages

CF1 Assignment Group 3 18.03.2024

Uploaded by

Rahatul Ashafeen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 14

Corporate Assignment-1

Adani Green Energy Limited


Submitted by Group 3
Rahatul Ashafeen (Roll No-2314036)
Sayantan Basak (Roll no- XXXX)
About the Report
This report evaluates Adani Green Energy Limited's (AGEL) corporate governance practices
to understand how they safeguard the interests of small shareholders.

Key Considerations for Small Shareholders:

Board Composition and Independence: The composition of the board of directors and the
presence of independent directors are crucial for ensuring unbiased decision-making.

Transparency and Disclosure: Small shareholders rely on clear and accurate information to
make informed investment decisions. AGEL's performance in these areas will be reviewed.

Minority Shareholder Rights: The report will examine how AGEL protects voting rights
and ensures fair treatment for all shareholders, regardless of investment size.

About Adani Green Energy limited:


Adani Green Energy Limited (AGEL) is India’s largest and world’s leading renewable
energy solutions partner enabling the clean energy transition with annual revenue of 8400 Cr
FY 23. AGEL develops, owns, and operates utility-scale grid-connected solar, wind and
hybrid renewable power plants.

With a locked-in growth trajectory up to 20.4 Gigawatt (GW), AGEL currently has an
operating renewable portfolio of 8.4 GW, the largest in India, spread across 12 states,
offsetting over 41 million tonnes of CO2 emissions cumulatively. AGEL is credited with
developing several landmark renewable energy power plants, the latest being the world’s
largest wind-solar hybrid power cluster of 2,140 Megawatt (MW) in Jaisalmer, Rajasthan.
The company has set a target of 45 GW by 2030 aligned to India’s decarbonization goals.
AGEL is focused on leveraging technology to reduce the Levelized Cost of Energy (LCOE)
in pursuit of enabling largescale adoption of affordable clean energy. AGEL’s operating
portfolio is certified ‘water positive for plants of more than 200 MW capacity’, ‘single-use
plastic free’ and ‘zero waste-to-landfill’, a testament to the company’s commitment of
powering sustainable growth.

 Board of Directors
1. Mr Gautam S Adani (Chairman and Non-Executive Director) since 23rd Jan 2015.
2. Mr Rajesh S Adani (Non-Independent and Non-Executive Director) since 23 rd Jan
2015.
3. Mr Sagar R Adani (Executive Director) since 31st Oct 2018.
4. Mr Vineet S. Jain (Managing Director and CEO) since 10th Oct 2020.
5. Mr Raminder Singh Gujral (Independent and Non-Executive Director) since 10 Th July
2020
6. Mr Dinesh Kanabar (Independent and Non-Executive Director) since 5th Jan 2021.
7. Mrs Ahlem Friga Noy (Nominee and Non-Executive Director) since 27th July 2022.
8. Mr Romesh Sobti (Independent and Non-Executive Director) Since 20th Sept 2021.
9. Dr. Poornima Advani (Independent Director) since 7th Aug 2019.
10. Mr. Sandeep Singhi (Independent Director up to 10th Nov 2022)
11. Mr. Jose Ignacio Sanz Saiz (Nominee and Non-Executive Director up to July 27,
2022)
12. Mr. Sunil Mehta (Independent Director effective November 10, 2022 up to February
24, 2023)

Analysis: AGEL has total 9 no of BODs which is an optimal size of board and good for
overall productivity in decision making. However, AGEL has adjusted the Board
members and lower down to 8 members. 2 Independent directors and 1 Nominee directors
retired in FY 22-23 which raised the concern about the internal politics. All three directors
of were part of various committees also.
Dr. Poornima Advani, Independent director, also left the AGEL in Q1 FY23-24. She was
the chairperson of CSR committee, Risk Management & Stakeholder’s Relationship
committee.
The below mentioned are the core expertise of Board directors.
 Independent Directors- In FY 22-23, There are total 5 no of Independent directors in
Board. 55% strength of independent directors is good in view of small holders security
and protection.

5 4
Independent Non-
Independent
Having 5 out of 9 board members as independent directors is a positive sign for the
protection of small shareholders at Adani Green Energy Limited (AGEL).

Advantages of Independent Directors:


Reduced Conflict of Interest: Independent directors are less likely to make decisions that
favor controlling shareholders or large institutions over the interests of all shareholders,
including small shareholders.
Objective Oversight: They can provide an objective perspective and hold management
accountable for its actions.
Diverse Expertise: Independent directors can bring a wider range of skills and experience
to the board, which can benefit the company as a whole.
Strength of 60% Independent Directors:
Majority Influence: With 5 directors out of 9 being independent, they have a significant
influence on board decisions.
Alignment with SEBI Regulations: SEBI, the Indian securities regulator, recommends
that listed companies have at least 50% independent directors. So, 60% meets or exceeds
this recommendation.

 Board meetings took place FY 22-23


Tota 6 of Board meetings have been conducted during FY 22-23. It’s a good number of
FY meeting to raise the concern by individual of institutional shareholders. Apart from it
2 nos of EGM, 1 no of AGM conducted.

AGM are conducting through video session due to post covid situation and venue
remained AGEL Head office Gujarat. E voting/Poll/Postal ballot have been done for the
recommendation approval from shareholders through NSDL E voting portal.

 BODs presence in AGM

Other listed companies in which BODs serve:


Analysis: All independent Directors work independently and there is no linkage of them
with promoters and related companies.
Absence of Mr. Raminder Singh Gujral who is also Chairman of Audit committee is
concern for small shareholders in terms business investment decisions.
 Chairman relationship with the CEO
There is separate posts of Chairperson and Chief Executive Officer: Mr. Gautam S. Adani
is the Chairman and Mr. Vneet S. Jain is a Managing Director & Chief Executive Officer
of the Company. Both these positions have distinct and well-articulated roles and
responsibilities. They are not related to each other.

 Any new items:news items about confrontations/unanimous decisions?- Hiden burg


report on Adani Group

 Takeover defences: 56.37% Shares holds by Promoters so there is no risk of Takover


 Potential conflicts of interest
Top shareholders (managers/govt./other insiders):
Size of block-holders’ holding:

 Do the current block-holders have a history of being active investors or passive?

 Does the government hold too much power?


 The government is highly involved in regulating and monitoring the operations of
Renewables energy business like of AGEL.
 Governments subsidy and regulations would have an impact on AGEL Business.
 Although Government holds very few shares in terms of state/central Government
However LIC holds 1.4% total shares of AGEL which could influence some
decisions.

 Do labour unions hold too much power? NO

 How many classes of shares are there?


AGEL has two classes of shares: common stock and Preferred stocks (Class A & Class
B).
 Is it a group company? It’s a part of Adani Group.
 Control structures (cross-holdings/self-holdings/shell companies)
 Are the cross-holdings by group companies?

 Length of manager tenure


Average length of KMP (Key Management personnel) is more than 8 years which is risky
for small investors.

 Does auditor provide services other than auditing?


Both statutory auditors only provide Tax, valuations & Risk based audits only

 Is the auditor report qualified?


Qualified Opinion: According to the information and explanations given to us and based
on our audit, pending completion of the ongoing investigations of Securities and
Exchange Board of India and completion of proceedings before the Hon’ble Supreme
Court in terms of its order dated March 2, 2023 as stated in the ‘Basis for Qualified
Opinion’ paragraph of our audit report, and the consequential impact it may have on
Company’s processes and internal controls including related party transactions and
compliance with applicable laws and regulations, to that extent we are unable to comment
on whether there is any material weakness in the Company’s internal controls as at March
31, 2023. A ‘material weakness’ is a deficiency, or a combination of deficiencies, in
internal financial control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. In our opinion, except for
the possible effects of the foregoing on the achievement of the objectives of the control
criteria, the Company has, in all material respects, adequate internal financial controls
over financial reporting with reference to these standalone financial statements and such
internal financial controls over financial reporting with reference to these standalone
financial statements were operating effectively as at March 31, 2023, based on the
internal control over financial reporting criteria established by the Company considering
the essential components of internal control stated in the Guidance Note on Audit of
Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered
Accountants of India.

 How frequently is auditor rotated?


There are independent statutory auditors:
1. M/s S R B C & CO LLP
2. M/s Dharmesh Parikh & Co LLP
Analysis: M/s Dharmesh Parikh & Co LLP has been appointed since company
incorporated (2015). AGEL has not changed Dharmesh Parikh & Co LLP auditor in last 8
years which raises concern over audit process. (Source ICAI guidelines
https://kb.icai.org/pdfs/PDFFile5b4f35a24df7e4.10654282.pdf & SEBI guidelines
https://www.sebi.gov.in/sebi_data/commondocs/cir2803an1_p.pdf).

 Loss of Objectivity: Over time, a long relationship between an auditor and a


company can lead to a loss of objectivity. The auditor might become hesitant to
challenge management or scrutinize practices too closely for fear of jeopardizing the
relationship.
 Reduced Scrutiny: A new auditor brings a fresh perspective and may be more likely
to identify potential problems or areas for improvement.
 Regulatory Requirements: While there are no strict term limits for auditors in India,
some regulations encourage auditor rotation to promote independence.

 How many committees on board? Are the composed of independent directors?


The Board Committees play a vital role in ensuring sound Corporate Governance
practices. The Committees are constituted to handle specific activities and ensure speedy
resolution of the diverse matters. The Board Committees are set up under the formal
approval of the Board to carry out clearly defined roles under which are considered to be
performed by members of the Board, as a part of good governance practice. The Board
supervises the execution of its responsibilities by the Committees and is responsible for
their action. The minutes of the meetings of all the Committees are placed before the
Board for review.
As on March 31, 2023, the Board has constituted the following committees / Sub-
committees:
I. Statutory Committees
A. Audit Committee: The Audit Committee comprise solely of Independent and nominee
Directors to enable independent and transparent review of financial reporting process and
internal control mechanism with an objective to further strengthen the confidence of all
stakeholders.
The composition of Audit Committee and details of attendance of the members during FY
2022-23 are given below:

B. Nomination and Remuneration Committee: All the members of the Nomination and
Remuneration Committee (NRC) are Independent and Nominee Director.
The details of the NRC meetings attended by its members during FY 2022-23, are given
below:

C. Stakeholders’ Relationship Committee: The Stakeholders’ Relationship committee of


Directors (SRC) comprise of three members, with a majority of Independent Directors.

The details of SRC Meetings attended by its members during FY 2022-23 are given
below:

D. Corporate Social Responsibility Committee: The details of CSR Committee meetings


attended by its members during FY 2022-23 are given below:

E. Risk Management Committee (“RMC”): The details of RMC meetings attended by its
members during FY 2022-23 are given below:
II. Other Non-Statutory Committees
A. Corporate Responsibility Committee
B. Information Technology & Data Security (Subcommittee of RMC)
C. Mergers & Acquisitions Committee (Subcommittee of RMC)
D. Legal, Regulatory & Tax Committee (Subcommittee of RMC)
E. Reputation Risk Committee (Sub-committee of RMC)

 Are there any influential individuals on board? (e.g. Buffet/Jobs)


Yes

 Do founders still hang on? (They may make emotional decisions)


No

 Summary:

Evaluation in view of small shareholders security


Criteria for evaluation Good (G) Bad (B)
6 Independent & 4 Non independent G
BODs Board experience and expertise G
Presence of Nominee director B
2 Independent directors and
nominee director retired in FY 22- B
23
1 Nominee Director serves as
Director in other subsidiary B
company
6 nos of BOD Meeting, 2 EGM, 1
G
AGM
Back to Back group companies
B
AGM on same day
Founders do not take emotional
G
decisions
No relation between Chairperson &
G
CEO of the Company
Length of manager tenure >8 yrs B
No linkage between Independent
Director and Non independent G
director

2 nos of independent statutory


auditors out of which one auditor
never changes (2. M/s Dharmesh B
Parikh & Co LLP) since the
Audit company incorporated
The qualified opinion in Audit
B
report
Auditors do not provide other
G
services other than auditing
Audit, Nomination and Numeration
committee comprises all G
Independent and Nominee director
Chairman of these Committees are
Committee G
Independent directors
There are ex KPMG Dy CEO and
other influential individuals on B
board
Top Shareholders
Government intervention B
Shareholders No recognised labour union G

 Conclusion: This report evaluated Adani Green Energy Limited's (AGEL) corporate
governance practices in FY 22-23, focusing on how they safeguard the interests of small
shareholders. While some positive aspects exist, such as a strong majority of independent
directors and a well-defined committee structure, certain areas raise concerns about
potential conflicts of interest and transparency limitations.

Key Findings

 Board Composition: AGEL's board has a positive aspect with 6 out of 9 directors
being independent (FY 22-23). However, frequent changes in board composition,
including the departure of independent and nominee directors, raise concerns about
stability and continuity.
 Transparency and Disclosure: AGEL publishes annual reports and conducts board
meetings regularly. However, the back-to-back holding of AGEL's AGM with other
group companies on the same day raises questions about accessibility for small
shareholders.
 Audit: The use of the same statutory auditor, M/s Dharmesh Parikh & Co LLP, since
incorporation (2015), raises concerns about potential limitations on audit
independence, as recommended by regulatory bodies. The qualified audit opinion in
FY 22-23 further highlights this concern.

Recommendations for Improvement

 Board Stability: Maintain a more stable board composition, minimizing frequent


departures of independent directors.
 Transparency: Enhance clarity and accessibility of information for small shareholders,
particularly regarding AGMs and related party transactions.
 Audit Rotation: Consider rotating statutory auditors after a reasonable period to
ensure audit independence and objectivity.

While AGEL demonstrates some positive steps towards good corporate governance, there is
room for improvement to fully address the concerns of small shareholders. Implementing the
recommendations above can enhance transparency, strengthen oversight, and ultimately
foster a more secure environment for all investors.
(Adani Green energy, FY 22-23)

References
Adani Green energy. (FY 22-23). Annua Report. AGEL.

You might also like