Different Strokes

ICICI Vs IDFC

For once, ICICI’s action is completely laudable. One of the big shareholders of IDFC has demanded that IDFC should pay it a dividend on the money it has raised. ICICI argues that a mere fraction of the Rs 2,320 crore raised is invested in infrastructure financing and the rest is deployed in treasury operations. Worse, it says IDFC has been investing funds raised from institutions such as ICICI in their own bonds and units. This means that ICICI and others are paying IDFC as much as 14 per cent for the privilege of giving it their money. Naturally, IDFC is making noises signaling disagreement, but it is time that the issue was debated. IDFC was set up only because Finance Minister P.Chidambaram was keen on a Chennai based FI. It operates almost exclusively out of Mumbai and he insisted on its creation even when the Infrastructure Leasing & Financial Services, which is similarly set up by a dozen-odd Indian and foreign banks and FIs,was already in existence. Even Manmohan Singh had created a similar institution for industrial development of the North East, from where he became a Rajya Sabha MP. The institution can hardly be called defunct, because it never even took off. If FMs cannot be stopped from wasting public funds on creating unnecessary institutions, then demanding institutional investors can at least be asked to ensure that they do what they are set up for.

Amazing transformation

A department that has become a source of constant amazement to investors is the Department of Company Affairs (DCA). Initially one was skeptical about DCA Secretary, T S Krishnamurthy’s promise that the department would respond to investors and get serious about grievance redressal. But the quick e-mail responses within hours are frankly astounding. Even more is the personal interest that the DCA Secretary has been taking in investor-related issues. It wasn’t long ago that the department never responded. One retired Major, surprised atKrishnamurthy’s personal attention put it best when he wrote to this column that it made him feel that there is still hope for the country.

First book building

The Hughes Software Systems issue — the first to follow the book building route and has collected Rs 6,000 crore — has raised a few questions. First, the over-subscription seems to reflect the immaturity of Indian investors. Secondly, the non-refundable service charge collected by Kotak Mahindra Finance is a shocker — it ranges from Rs 3,000 for 500 shares to Rs 5,000 for 1,000 shares (including a documentation charge of Rs 200). Since the size of the bids is so tiny, why collect huge non-refundable fees from retail investors? Why should SEBI permit it? The lead managers seem to have drummed up the final subscription with an eye to the float they would enjoy for a week. Why else would one of them, after having insisted on a 20 per cent upfront payment plus service charges, have accepted bids with margins of as low as 5 per cent after theissue was clearly known to be oversubscribed? SEBI should answer a few questions and put in more checks.

Author’s email: suchetadalal@yahoo.com