a. Board Investment Committee

The Investment Committee of the Company shall ensure that there is effective oversight on the Company’s Stewardship activities. The Investment committee shall be responsible for monitoring implementation of the Stewardship code duly approved by the Board.

b. Investment Front Office

The Front Office will be responsible for overall implementation and execution of this Stewardship Policy. The team will be responsible for ongoing monitoring of the investee companies, engaging with the management of the investee companies and identifying situations which require engagement / intervention in the investee companies and also determine the nature of intervention required.

c. Investment Mid & Back Office

The Mid & Back Office team shall ensure that due records of voting activities are maintained and ensure necessary reporting requirements in line with the Policy.

A. Discharge of stewardship responsibilities

1. Stewardship activities of the Company shall be undertaken by the Investment Team within the guidelines set out in the specified regulations and master circular read with this Stewardship Policy.

2. The Board of the Company may decide to selectively intervene based on its extent or level of investment. In such a case, the board will set a threshold level, which will help in determining the level of engagement and intervention that the Company should have with the investee company.

3. The Investment team at VRL shall be responsible for monitoring and engaging with such investee companies falling beyond the threshold through interaction with management of investee companies and exercise vote for senior management appointment, remuneration, strategic decisions, appointment of auditors, etc. Interaction with all investee companies would be on a best effort basis.

4. The Company may use the services of external service providers such as institutional advisors (through professional advice, research reports like market survey data, industry wide analysis, business valuation etc.) in future to arrive at voting decisions. However, such an advice shall not be binding on the Company in any case. Under all circumstances, the ultimate stewardship responsibilities shall be discharged by the Company itself.

B. Manage conflict of interests

The voting for company resolutions could result in some instances of conflict of interest between the best interests of the Shareholders of VRL and the policyholders.

Conflict of interest could arise in case of the following situations:
a. if the investee company is of the same promoter group
b. if the investee company is a key business partner

VRL would look to avoid any conflicts of interest wherever possible. Investment mid office will prepare a list of the company’s key business partners and promoter group companies and update the same on a regular basis.

Following shall be considered when an issue of conflict arises:

(i) On the identified cases of conflict, the Company could put a blanket ban of investment in certain cases
(ii) The voting decision needs to be in the best interest of the stakeholders with the interest of policyholders being paramount.
(iii) The transaction which is the subject matter of the resolution needs to be in compliance with applicable regulations and at arm’s length.
(iv) Aspects of clear segregation between person exercising voting function vis-à-vis sales / client relations function
(v) In the event that any person exercising the voting function has actual/potential in the transaction (by virtue relationship with promoter group/business partner), such person should recuse from decision making

VRL will maintain a record of minutes of decisions taken to address such conflicts and the same shall be apprised to the Audit Committee.

C. Monitoring of Investee companies

(i) There is no threshold limit for monitoring purposes. However, exposure beyond 3% of paid-up capital of the investee company shall be considered meaningful and would be the threshold limit involving higher levels of monitoring. The investment team will however be responsible for monitoring all the companies in which VRL has invested. Level of monitoring will take cognizance of the size of the investment.

(ii) Publicly available information, sell side research and industry information shall be some of the means to monitor the Investee companies.

(iii) The Company will endeavor to participate, depending on the threshold level and the nature of the resolutions proposed in the voting of the resolutions of the investee company which could include but not be restricted to annual results, appointment of directors, remuneration, etc.

(iv) Monitoring will focus on areas like:

a. Company strategy and performance – operational and functional
b. Industry level monitoring and possible impact on the investee companies
c. Quality of company management and Board, leadership
d. Corporate governance inclusive of remuneration, Board structure, and Related Party Transactions
e. Risks including Environmental, social and governance risks
f. Shareholder rights and grievances

(v) The Company will not seek to nominate its representative on the Board of an investee company, unless such investment is significant and/or strategic in nature and / or the Investment Committee decides that a nominee is warranted.
The Investment Committee will place before the Board of Directors of the Company such recommendation of nomination to the Board of investee company. Once such approval is received, the Company will take up with the investee company, for nomination of its representative to be inducted as a Nominee Director on the Board of the investee company.

D. Intervention in the Investee companies

(i) Intervention in Investee companies may be required to protect the value of the Investment while discharging its stewardship responsibility.
(ii) The Company will look to intervene in Investee Company on a case-to-case basis depending on the observations noted as a part of the monitoring activity envisaged above and reproduced below:
a. Company strategy and performance – operational and functional
b. Industry level monitoring and possible impact on the investee companies
c. Quality of company management and Board, leadership
d. Corporate governance inclusive of remuneration, Board structure, and Related Party Transactions
e. Risks including Environmental, social and governance risks
f. Shareholder rights and grievances
(iii) Intervention may be done at various levels in the Investee company.
a. Initial Engagement: The concerns or apprehensions shall be discussed with the Investee company management
b. Follow up Engagement: In case there is no response or no follow -up action by the Investee company to address the raised concern despite passage of a reasonable time, a follow up engagement would be done. An escalation to senior management of the company may also be explored at this stage
c. Escalation: In case there is no progress despite the first two steps, the matter would be further escalated to the Board of the Investee company
d. Collaboration with other institutional investors as specified under Clause E below
e. Drive interaction through the General Insurance Council in case of any industry level issues
(iv) Investment committee to consider and decide on mechanism to be opted and escalation of matters.
(v) Disclosure of interactions, if any, would not be compulsory due to the confidential nature of the same.

E. Collaboration with other institutional investors, where required, to preserve the interests of the policyholders (ultimate investors)

(i) In case of issues which are not routine and/or ordinary, the investment team may look to collaborate with other institutional investors.
(ii) Collaborative engagement may be appropriate during times of extreme corporate stress or in wide economic distress (affecting the corporate), thus entailing risks of significant investment value reduction.
(iii) Collaborative action would only be initiated if it is believed to be the only way for exercising effective / appropriate influence.
(iv) As the nature of this interaction would be highly confidential and could affect the value of investments and, thereby, Policyholders’ detrimentally, the Company would not be disclosing such interactions.

F. Voting policy and disclosure of voting activity

(i) The voting policy is detailed separately in Annexure A.
(ii) The investment team will be responsible to voting resolutions as per the Company’s voting policy.
(iii) The Company may choose to vote for or against any proposed resolution or abstain from voting on any resolution.
(iv) The Company also has a Security Lending and Borrowing Policy as per Annexure B, which shall be disclosed on the Company’s website.

G. Periodical reporting/disclosure on stewardship activities

(i) The Company shall ensure that this Stewardship Policy is disclosed on its website.
(ii) Any change or modification to the policy shall also be disclosed at the time of updating the amended version of the Policy on the website.
(iii) The Company will disclose stewardship activities on a website on an annual basis.
(iv) The Company shall disclose the Voting Report on its website, on a quarterly basis. The Voting disclosure will be in the following format:

1. The Custodian will mail the details of the meeting (date, agenda etc) to all analysts, fund managers, CIO and back-office personnel.
2. The responsibility of recommending whether we vote for or against a resolution or abstain from voting will be that of the analyst tracking the stock or the Fund manager.
3. The company would compulsorily vote if its holding in the investee company is greater than or equal to 3% of the Investee company’s paid-up capital. The Investment Back-office team shall monitor the same and inform the Investment front office of any compulsory voting requirement.
4. Active participation and voting on resolutions/proposals of the investee companies shall be exercised only if such resolution/proposal is communicated to the shareholders at least ten working days prior to the voting period/date/deadline. This would give investors sufficient time to analyze the impact of proposed action and vote accordingly.
5. Once approved, the equity analyst /Fund manager will send the instructions to the back office.
6. The back office will send the necessary instructions to custodian requesting them to carry out our instruction.
7. Mid office will monitor compliance in this regard etc.
8. Mid/back office shall maintain record of voting at various meetings of investee companies