Eicher Motors reappoints Siddhartha Lal as MD; CCI imposes Rs 200 crore fine on Maruti Suzuki India over dealer discount policy; LIC IPO

Eicher Motors reappoints Siddhartha Lal as MD

In the midst of a compensation dispute, the board of directors of Eicher Motors Ltd said Monday that it had chosen to re-appoint Siddhartha Lal as Managing Director with effect from 1 May 2021.

“The matter pertaining to the appointment of Siddhartha Lal as Managing Director and the remuneration proposal was discussed comprehensively, and the Board unanimously decided to reappoint Siddhartha Lal as Managing Director, with effect from May 1, 2021,,” the company stated in a regulatory filing.

Additionally, the board stated that the average staff increment for FY21 was 9.7 percent and that the 10% increase for Lal is in line with the average compensation increase.

“Owing to this, despite there being a 9.7% average increase in salaries at EML in FY2021, the median shows an increase of just 1%. The board fully supports Siddhartha’s appointment as Managing Director and his proposed compensation, and we are confident that our shareholders will support these resolutions as well,” said Manvi Sinha, Independent Director, and Chairperson of the Nomination and Remuneration Committee at Eicher Motors. “During FY 2021, 267 employees joined the company, out of which 77% were hired at below the median salary and 284 employees exited the company out of which 66% were drawing higher than the median salary,” she added.

S Sandilya, Chairman of Eicher Motors Ltd, commented on the outcome of the Annual General Meeting and specifically on the remuneration issue, saying, “The Nomination and Remuneration Committee (NRC) of the Company has considered all the factors, including inputs from various stakeholders including institutional investors before recommending remuneration for key managerial persons. The primary concern with investors was not Siddhartha’s reappointment as Managing Director or the proposed compensation; it was the lack of clarity regarding the enabling provision that potentially allowed payment of remuneration upto 3% of profits. Over the last four years, we have had the same limit of 3%, but in reality have paid only a fraction of that amount. The actual remuneration during FY2021 was at 1.04% of profits, with the preceding years being at a lower percentage ” 

Given the previous years’ real salary paid to the Managing Director, the Board has now authorised a revised remuneration structure for the Managing Director, with a maximum cap of 1.5 percent of profits as per Section 198 of the Companies Act, the business added.

Earlier on 17 August, shareholders at the annual general meeting rejected a proposal to re-appoint Siddhartha Lal as the company’s managing director for a five-year term beginning May 1.

Members also rejected a proposal to increase Lal’s salary during the company’s 39th annual general meeting earlier this week.

While 73% voted in favour of re-appointment, the remaining 27% voted against it. As a special resolution, it required the backing of 75% of the votes cast to pass. Royal Enfield, a division of Eicher Motors, is a market leader in the mid-sized motorcycle class, operating in both home and foreign markets.

Noting Siddhartha’s role to the company’s growth, Sandilya stated, “Siddhartha has been the architect of Eicher Motors’ two-decade growth model. “Siddhartha has been the architect of Eicher Motors’ growth story over the last two decades. When he took over as CEO of Royal Enfield in 2000, the division was making large losses and was slated for closure. Siddhartha has transformed Royal Enfield into a formidable premium motorcycling brand in India, pioneering the leisure riding segment. Royal Enfield grew the premium >250cc market in India exponentially, and has maintained a >90% market share in it for the last decade, resulting in EBITDA margins for EML at over 30% during the pre-pandemic peak. Subsequently Siddhartha moved to the UK in 2015 to personally drive the company’s ambition of becoming the first global premium consumer brand to emerge from India; there he was directly overseeing the product development and international expansion “

CCI imposes Rs 200 crore fine on Maruti Suzuki India over dealer discount policy

The Competition Commission of India (CCI) fined Maruti Suzuki India Limited (MSIL) Rs 200 crore on August 23 for anti-competitive activities linked to how it encouraged dealers to discount cars.

The CCI stated in a statement: “The Competition Commission of India passed a final order against Maruti Suzuki India Limited (MSIL) for indulging in anti-competitive conduct of Resale Price Maintenance (RPM) in the passenger vehicle segment by way of implementing Discount Control Policy vis-à-vis dealers, and accordingly, imposed a penalty of Rs 200 crore upon MSIL, besides passing a cease-and-desist order.”

It added: “CCI found that MSIL had an agreement with its dealers whereby the dealers were restrained from offering discounts to the customers beyond those prescribed by MSIL.”

“In other words, MSIL had a ‘Discount Control Policy’ in place for its dealers whereby the dealers were discouraged from giving extra discounts, freebies, etc. to the consumers beyond what was permitted by MSIL. If a dealer wanted to offer additional discounts, prior approval of MSIL was mandatory. Any dealer found violating such Discount Control Policy was threatened with the imposition of penalty, not only upon the dealership but also upon its individual persons, including direct sales executive, regional manager, showroom manager, team leader, etc.”

In 2019, the CCI opened an investigation into the allegations. It was looking into charges that Maruti forces its dealers to cap their discounts, essentially inhibiting competition and injuring consumers who could have benefited from reduced costs if dealers functioned freely.

The CCI stated in a 10-page report released earlier that the matter originated when an anonymous e-mail was submitted to MSIL suggesting the carmaker used resale price maintenance in some locations.

MSIL apparently used a similar discount control method throughout India – notably, in cities with more than five dealers.

According to the latest CCI investigation, MSIL hired Mystery Shopping Agencies (‘MSAs’) to pose as customers at MSIL dealerships in order to determine whether additional discounts were being offered to customers. If an additional discount is discovered to have been offered, the MSA will report it to MSIL management with proof (audio/video recording), who will then send an e-mail to the errant dealership with a ‘Mystery Shopping Audit Report,’ confronting them with the additional discount and requesting clarification. If the dealership fails to provide MSIL with satisfactory clarification, a penalty will be levied on the dealership and its workers, which may include the threat of supply interruption. MSIL would even direct the dealership as to where the penalty should be lodged and how the penalty should be used.

Thus, CCI determined that MSIL not only imposed the Discount Control Policy on its dealers, but also monitored and enforced it by monitoring dealers via MSAs, imposing penalties on them, and threatening strict action such as supply interruption, collection and recovery of penalties, and utilisation of the same. Thus, the CCI held that MSIL’s conduct had a material adverse effect on competition inside India was in violation of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002.

Maruti Suzuki responded to the CCI order, saying: “We have seen the CCI’s order dated 23 August 2021. We are reviewing the order and will take appropriate legal action. The MSIL has always acted in the consumer’s best interests and will do so in the future.”
MSIL previously stated that it had no control or supervision over dealers, except to strike a balance between consumer happiness and scheme conformity.


With the government pressing ahead with the sale of shares in the Life Insurance Corporation of India (LIC), up to 16 merchant bankers have expressed interest in arranging the much-anticipated initial public offering.

These bankers will address the Department of Investment and Public Asset Management (DIPAM) over the next two days, August 24 and 25, according to news agency PTI. This ministry-level department is responsible for the LIC stake sale procedure.
The LIC IPO, which is expected to be the largest in the country, is critical to the central government’s disinvestment aim, which was thwarted last year by Covid-19. The government aims to sell its stake in the life insurance behemoth during the current fiscal year.
For fiscal year 2021-22, the government has set a disinvestment target of 1.75 lakh crore. It has earned 8,368 crore so far this fiscal year through minority stake sales in PSUs and the sale of SUUTI’s interest in Axis Bank.

Seven foreign bankers are among the lenders bidding to manage the LIC IPO. They will make presentations to DIPAM on Tuesday, according to PTI, citing a department circular.

BNP Paribas, Citigroup Global Markets India, DSP Merrill Lynch, which is now known as BofA Securities, Goldman Sachs India Securities, HSBC Securities and Capital Markets (India), JP Morgan India, and Nomura Financial Advisory and Securities will all make presentations tomorrow (India).

On Wednesday, DIPAM will hear presentations from nine domestic bankers. Axis Capital Ltd, DAM Capital Advisors, HDFC Bank, ICICI Securities, and IIFL Securities would be among them. JM Financial Ltd, Kotak Mahindra Capital, SBI Capital Market, and YES Securities India Ltd will also make presentations on the same day.
DIPAM invited submissions from merchant bankers interested in administering the LIC initial public offering on July 15. The government intends to designate up to ten Book Running Lead Managers (BRLMs) to work collaboratively on the inaugural share sale. Bids were due by August 5.
Last month, the Cabinet Committee for Economic Affairs (CCEA) approved LIC’s initial public offering proposal. The government’s interest in the company will now be determined by the ministerial panel known as the Alternative Mechanism on Strategic Disinvestment.

“The IPO’s potential size is likely to be significantly greater than any precedent in Indian markets,” DIPAM stated.

Prior to the initial public sale, the government retained actuarial firm Milliman Advisors LLP India to examine LIC’s inherent value. Deloitte and SBI Caps have been retained to advise on the pre-IPO deal.
Following LIC’s first public offering, around 60% of insurance activity will be conducted by listed businesses, Additional Secretary in the Finance Ministry Amit Agarwal stated last week.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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