Graphite miner Tirupati Graphite LON:TGR is facing a possible shareholder revolt in June as former board members and other investors are becoming increasingly concerned about governance arrangements at the company. One of the firm’s lead brokers has also resigned, citing similar worries.
Tirupati Graphite has an operating mining business in Madagascar, with two projects that produce a combined 30,000 tpa of installed capacity. They produce high quality flake graphite. The company also has the rights to a pair of graphite projects in Mozambique which are yet to become operational.
A general meeting of shareholders is being convened in London on 11 June at the offices of Bird & Bird. A published Requisition Letter has demanded the removal of several directors, including CEO Shishir Poddar as well as his daughter Puruvi Poddar, and their replacement with a number of other fully independent directors.
All the company’s previous slate of non-executive directors resigned in quick succession at the start of this year. Their replacement with inexperienced directors by management and Poddar senior’s role as combined Chairman and CEO have been cited as cause for concern.
Tirupati’s broker Optiva Securities has resigned from its role, again over concerns about governance. In its resignation letter, Optiva CEO Christian Dennis said Optiva was not in a position to raise further funds for Tirupati, and that it was supporting resolutions to replace the current board with proposed new directors. Currently only CMC Markets is acting as lead broker, having been appointed in March of this year.
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Current board needs to be changed
Tirupati has acknowledged that its current board structure needs addressing and that it will move to appoint wholly independent directors as quickly as possible. This will include a new non-executive chair and a CFO, it said in a statement on 13 May.
Poddar told The Armchair Trader he was in the process of sourcing the new independent roles which he said would require people with the requisite level of experience in mining project development and capital markets. He stressed that they would have no pre-connection with the founders. “We own the responsibility to re-build the company and ensure the share price reflects the company,” he said. As yet no final target appointments have been identified by Tirupati management.
Tirupati Graphite raised GBP 5m in December 2022, which was oversubscribed, to complete the acquisition of Suni Resources with its Madagascar assets and acquire licences for further assets in Mozambique. But one of the biggest shareholder concerns relates to the downstream business in India, particularly Panagraph, a company also controlled by the CEO. Original plans to bring Panagraph into Tirupati have slowed to a crawl. Tirupati says lack of progress in this area is down to “an impasse” which is entirely beyond its control.
Indian red tape has hampered Tirupati Graphite plans, says CEO
In a call with The Armchair Trader, Tirupati Graphite CEO Poddar said that the company’s relationship with intermediary firms in India was an essential part of its sales strategy, as they pay higher prices for graphite than European or American buyers. He said Tirupati has been hampered in bringing other family-owned distribution assets into the Tirupati corporate structure by regulations in India governing cross-border acquisitions.
It should be emphasised that the downstream business controlled by the Poddar family is not the only sales channel open to Tirupati Graphite in India. According to the proposed new directors, it will be possible to partner with other entities in India to achieve potentially higher prices than are currently being yielded through the Poddar family’s Panagraph business.
Shares in Tirupati Graphite have dropped from over 40p a year ago to trade at 5.42p at time of writing. This is despite increasing global demand for graphite across a number of key sectors, not least lithium-ion batteries. Demand for natural graphite is forecast to continue to grow dramatically over the next five years.
The Requisition Letter also questioned the level of oversight of the management team when it came to the new resources in Mozambique.
“Deposing the existing board would remove it of critical sector and business knowledge, intellectual property and relationships,” Tirupati said in response to the Requisition Letter this month. “The proposed directors have neither the sector skills nor experience to navigate the complex and specialist graphite sector. Their appointments would be value destructive to the company’s prospects and fail to represent appointments of wholly independent directors.”
However the Requisitioning Group said that the proposed directors have an extensive network and experience in Africa, including in Mozambique. They are worried about news of inadequate attention to the Mozambique projects, missed payments for securing premises, and poor communication with authorities. The proposed directors plan to usher in a new era of collaboration by deploying the necessary human and financial resources to drive value growth in these projects.
It should be stressed that the requisitioners have not proposed removing the existing executive management. The proposed directors aim to establish clear independence between the roles of Chairman and Managing Director to ensure a balance of power and enhance corporate oversight.
