Bayer CropScience gets nod on related trade but some shareholders oppose

24 August 2022

The results of voting on resolutions in the annual shareholders meeting of Bayer CropScience Ltd on Monday indicate that a section of non-promoter shareholders were opposed to the jump in related party transaction limit with the ultimate promoter holding company Bayer AG to 30 bln rupees from 18 bln rupees.

The ordinary resolution on related party transactions, in which promoter shareholders were not permitted to vote as per Securities and Exchange Board of India's norms, saw 20% of non-institutional public shareholders and 14.1% of institutional public shareholders vote against the proposal.

Overall, 14.1% of public shareholders who voted in the meeting were against the proposal. But since the ones voting in favour were greater than 50% the company got the approval to hike the related party transaction limit.

The shareholder approval will now enable Bayer CropScience to buy goods from, or to effect sales to, Bayer AG, along with other specified types of related party transactions for a total value of 30 bln rupees every year from 2022-23 (Apr-Mar) to 2026-27.

The company has justified the need for related party transactions with Bayer AG on the grounds that it gave access to scientific know-how and enabled it to become part of Bayer’s global supply chain.

It also justified the jump in the limit to "future growth plans.”

In terms of proportion of Bayer Cropscience's annual revenue in 2021-22 the raised related party transaction limit of 30 bln rupees amounted to 63%. It was higher at 70% in the previous financial year.

Further, the 30-bln-rupee limit was 2% of Bayer AG’s consolidated turnover in 2021 (Jan-Dec).

Earlier, Bayer Cropscience had taken shareholder approval in August 2017 to make related party transactions with Bayer AG for 18 bln rupees every year till 2021-22.

The value of related party transactions with Bayer AG in 2021-22 was 16.7 bln rupees, close to the 18-bln-rupee limit.

It indicates a likelihood of Bayer CropScience utilising the new 30-bln-rupee limit near to its full extent in the current financial year or in the following years.

In the shareholding pattern of Bayer Cropscience as of June 30, foreign promoter entities including Bayer AG, Monsanto Company and two others, and domestic promoter entities Bayer Vapi and Monsanto Investments India, together held 71.4% of the company's shares.

Bayer AG is the ultimate promoter holding company of Bayer Cropscience.