The Men Who Run Vedanta Resources Plc

What you need to know about the top executives of Indian conglomerate Vedanta Resources plc (LON:VED).

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Management can make all the difference to a company’s success and thus its share price.

The best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. Some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.

In this series, I’m assessing the boardrooms of companies within the FTSE 100. I hope to separate the management teams that are worth following from those that are not. Today I am looking at Vedanta (LSE: VED), the diversified Indian metals and mining company that bought Cairn India.

Here are the key directors:

Director Position
Anil Agarwal Executive chairman
Navil Agarwal Deputy executive chairman
Mahendra S Mehta Chief executive

Owner-managed

Vedanta is 65% owned by an Agarwal family trust which is entitled to appoint directors to the board, subject to there being a majority of independent directors. So we have controlling shareholders as executive chairman and deputy chairman, and no finance director with fiduciary duties to shareholders.

Vedanta falls into the cadre of FTSE 100 companies where normal shareholders are minority investors in a company run by entrepreneurial founder shareholders, such as Antofagasta, Fresnillo and ENRC. The added dimension in Vedanta’s case is the substantial minority interests within the group with debt carried at operating company level so that, effectively, a relatively small tail wags a big dog.

Scrap metal trader

Anil Agarwal founded Vedanta in 1976. He started as a scrap metals trader and has built the company, with a large number of acquisitions, with the aim of creating an Indian natural resources champion. The story resembles, in some respects, that of the Russian oligarchs. Vedanta listed on the LSE in 2003 since when shareholders have seen an eight-fold increase in the share price before falling back to a little under two-times now.

Navil Agarwar is responsible for strategy and finance. His career has been spent in the Vedanta group.

MS Mehta joined the group in 2000, initially in its zinc business rising to be CEO of that division. He previously worked for Indian steelmaker Lloyds Steel Industries.

US ambassador

Vedanta’s five non execs bring a sensible mix of influence and governance. They include two drawn from the Indian public sector, including a former home secretary and ambassador to the US, a former HSBC banker, a former emerging markets investment banker and a partner of law firm Ashurst.

Vedanta has suffered some bad press in India over environmental, health and safety, and human right issues that might have been more embarrassing for a ‘conventional’ FTSE 100 company. This led to PIRC recommending the senior non exec should not be re-elected in 2010 but he remains in situ.

I analyse management teams from five different angles to help work out a verdict. Here’s my assessment:

   
1. Reputation. Management CVs and track record.
Self-made.
 

 Score 4/5

2. Performance. Success at the company.
Good.
 

Score 4/5

3. Board Composition. Skills, experience, balance
Executive chairmen/owners, no FD. Sensible non execs.
 

 Score 1/5

4. Remuneration. Fairness of pay, link to performance.
Uncontroversial.
 

 Score 3/5

5. Directors’ Holdings, compared to their pay.
CEO has just £400k-worth of shares.
 

 Score 2/5

Overall, Vedanta scores 14 out of 25, a fairly poor result. Poor governance does not seem to have been an issue for investors, but the structure provides little independent and transparent oversight of the owners.

I’ve collated all my FTSE 100 boardroom verdicts on this summary page.

Buffett’s favourite FTSE share

Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His recent acquisition, Heinz, has long had a reputation for strong management. Indeed Mr Buffett praised its “excellent management” alongside its high quality products and continuous innovation.

So I think it’s important to tell you about the FTSE 100 company in which the billionaire stock-picker has a substantial stake. A special free report from The Motley Fool — “The One UK Share Warren Buffett Loves” — explains Mr Buffett’s purchase and investing logic in full.

And Mr Buffett, don’t forget, rarely invests outside his native United States, which to my mind makes this British blue chip — and its management — all the more attractive. So why not download the report today? It’s totally free and comes with no further obligation.

> Tony owns shares in HSBC but no other shares mentioned in this article.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Bournemouth at night with a fireworks display from the pier
Investing Articles

After plunging 18% in 3 months is the Scottish Mortgage share price ready to explode?

Harvey Jones says the Scottish Mortgage share price was always going to struggle in today's turmoil, but it may also…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

3 beaten-down UK shares to consider in an ISA before markets recover

Harvey Jones picks out the three worst-performing UK shares over the last month and wonders if this is a buying…

Read more »

Investing Articles

It’s up 8% in a week but this dividend stock still yields more than 9% with a P/E under 13!

Harvey Jones says this FTSE 100 dividend stock offers one of the highest yields around, and its shares are climbing…

Read more »

Investing Articles

I’ve just snapped up these 2 dirt-cheap growth stocks and I’m ready for the next bull market

Harvey Jones can't wait for the next stock market bull run and has already started buying growth stocks in preparation.…

Read more »

Investing Articles

See how much monthly second income an investor could earn from a £20k ISA

Harvey Jones shows how much second income a balanced portfolio of FTSE 100 dividend companies could generate inside a tax-free…

Read more »

Investing Articles

A stock market crash could help an investor retire years early. Here’s how

Instead of fearing a stock market crash, this writer sees it as an opportunity for the well-prepared investor to try…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

With no savings at 30, here’s how an investor can work towards a huge passive income portfolio

Consistency is key, and it can certainly pay to start contributing to an ISA sooner rather than later in the…

Read more »

Investing Articles

Looking for shares to buy in a wobbly market? Don’t ignore these 3 quality indicators!

Stock market turbulence can be a good time to hunt for quality shares to buy, in this writer's view. Here's…

Read more »