Different Buzz

The 10 per cent bonanza

Last week, theVarma panel on primary markets recommended that telecom, media and infotech companies be allowed to list their equity with a public offering of a mere 10 per cent (as against 25 for others) of their equity. There were three dissents to this the investor representative, the finance ministry representative and a professor. Yet the committee members and invitee merchant bankers carried the decision. SEBI seems to have a simple agenda revive the primary market at any cost. It was thus a cakewalk for those who wanted the reduction. A 10 per cent offering is in the interest of companies and their intermediaries. They can cash in on the incredibly high valuation of their stock by offering shares at an artificially high price. Small offerings make it easy to whip up frenzy for the stock and the consequently tiny floating stock keeps shares at an unnatural high. Is this the sort of primary market revival that SEBI wants? Maybe SEBI should keep a file on the track record of some of its invitee investment bankers.They had placed equity at incredibly high premia during the mad days of 1995. These issues, including their own are unlikely to see even half those values in the near future; some have even turned sick.

Depositors’ protection

The Maharashtra government has finally notified rules for protection of depositors under the Maharashtra Protection of Interests of Depositors (in Financial Establishments) Ordinance. This sets the stage for action against the list of 19 firms submitted by SEBI. It also proposes to attach the properties of these companies, examine witnesses, call information with the help of the police and even dispose off the property with the authority of the court. The problem is that shady promoters usually transfer money and property from the company into their personal names. However, the ordinance only allows probe of the place and property of the promoters, directors, and managers of such companies they cannot attach property. Maybe it’s a step forward; but it may still be a long timebefore investigation actually leads to the recovery or disgorgement of the ill-gotten wealth of unscrupulous promoters. The SEBI list has only three companies that run into tens of crores of rupees. However, Kirit Somiaya, the BJP MLA who lobbied relentlessly to have the ordinance and rules cleared, has submitted two names in addition to the SEBI list V.J. Finance and C.U.Marketing.

The technology hype

That small segment of the population which thinks that computers and the internet are great levelers and will give us a fighting chance to catch up with the rest of the world may be in for some rude shocks. Policy makers and politicians will do their best to drag us down. Look at the poll panel it thinks that Chandrababu Naidu’s conference calling facility is an election gimmick. Then we heard some members of the RSS’s apex think-tank say that the importance of computers is being over-emphasised. Such disbelievers exist in other parties too and they take pride in their ignorance. Hopefully thebelievers will steam roll the need for automation.

Author’s email: suchetadalalyahoo.com