Bhujia at the AGM

Listening to a friend’s experiences of attending a company’s annual general meeting last week, I came to discover that Haldiram’s Bhujia plays an important role in India’s capital markets. My friend went to this AGM, which was of a somewhat smaller company than he has hitherto been familiar with. Here’s what he observed. Outside the venue, there was a brisk trade in signed proxy forms. He found this surprising, because nothing remotely resembling a vote was expected. What was even more curious was that even though there was someone buying the proxy forms, and there were a number of shareholders selling them, the going price was only Rs 100 each.

Watching the proceedings a little more closely, he also realised that many of the proxy-sellers were carrying a relatively large number of forms that represented a small number (five or ten) shares each. All this was very mysterious. However, later in the day the solution to the mystery revealed itself. It was Haldiram’s Bhujia. Each shareholder (or rather, each holding and thus each proxy form) were given five large-sized packets of the bhujia, adding up to two kilos of the stuff, as gift. Of course, since gifts are technically not allowed at AGMs, these were supposed to be refreshments even though I doubt whether any shareholder could have felt refreshed after eating two kilos of bhujia.

The mystery of the proxy buyer was also thus revealed. It wasn’t as much a proxy for shareholder’s vote as a proxy for bhujia. After the AGM, the proxy-buying gentleman collected a huge number of bhujia packets and carried them off in a big sack he had brought along for the purpose. The hundred rupees he had paid for each proxy form was a way of buying bhujia at about a 60 per cent discount to the open market price. This, in turn leads me to speculate about the business model behind making such an open offer for bhujia. Why would anyone do it? I mean, if you and I were in need of a lot of bhujia (even in industrial quantities, for whatever reason) we would at most go to a wholesale shop. It would never occur to us to obtain it by going to an AGM, buying proxy forms, getting bhujia as refreshment, and then carrying it home in sacks. So there had to be something more to this carry trade in bhujia.

I see two possibilities. One, the proxy buyer was an agent of the original bhujia wholesaler. Over time, this astute merchant had realised that one could just sell bhujia to AGM organisers and soon thereafter, buy it back at a discount and then repeat the cycle for certain profits. Come to think, it’s not that much different from many promoters do on capital markets anyway.

The second possibility is that the proxy buyer is more like a broker than a promoter, in the sense that it wasn’t about bhujia specifically. He could be someone who shows up at a lot of AGMs during the AGM season, finds out from the organisers what they are distributing and then sets up his counter for trade after figuring out n offer price for the proxy forms that would give him a good spread. Again, very much like the capital markets. At this point in this article, I could succumb to the temptation of sermonising about what shareholders should ideally be doing at AGMs but I’ll resist. It doesn’t really matter. Perhaps there are stocks that could make the transition from a sell to a buy on the basis of two kilos of bhujia once a year. Come to think of it, I myself have some worthless scrips which might make the grade, especially if there were other options apart from bhujia. I mean bhujia is definitely the more tradable instrument but for shareholders who would like to exercise the option there and then, something hot and fresh may be more attractive.