Different strokes

ICICI8217;s disclosures abroad

ICICI will now have to worry about its foreign investors8217; reactions to its bailout of steel units or others. Its ADR prospectus states that its NPAs in the steel sector second only to textiles havealready increased 40 per cent to Rs 573 crore in June 1999. This clearly does not include its share of the increased Jindal Vijaynagar8217;s project cost. Since ICICI8217;s ADR prospectus repeatedly points out that the iron and steel, metals and textiles account for the highest per cent of its NPAs, the dilution of charge on assets, as demanded by Essar Steel for FRN holders will surely worry its foreign investors. ICICI also says that 55 per cent of its loans to the man-made fibre industry and 20 per cent of those to the textile sector have been classified as non performing. The rapid rise in financial, as well as performance guarantees, which had shot up 125 per cent from 1997 to 1998 has, however, slowed to 5 per cent in 1999 but still stands at Rs 4,851 crore. Even costs have risen 8212; a 40 per cent rise in administration costs, 20 per cent in employee expenses and a huge 60 per cent in premises and equipment due to the swank new office building.

Dangerously high fees

We now hear that Kotak Mahindra haspromised to return the non-refundable service charge that it forced investors to pay for applying to the Hughes Software issue it is keeping the documentation charges8217; of Rs 200. Earlier, it had promised this is only to unsuccessful candidates and those allotted the shares had to fork out upwards of Rs 3,000 plus the issue amount for owning the shares. SEBI, when contacted, knew nothing about the fees but promised to find out considering that the primary market has been dead for so long, one would have expected the regulators to be more vigilant. There is still no explanation for these charges. If book-building had allowed those investment banks who ran the book to decide who gets what share, the service charge may have still made some sense. But since the allotment is to be decided on a proportional basis what is Kotak charging the money for? Also, if investors are asked to pay Rs 200 per form, even without the service charge, one can safely predict that the book-building route will only be used by thosefirms which expect a massive subscription. But this will kill a new concept before it takes off.

System failures?

Now that the connectivity issue between the two depositories has been resolved, SEBI is pushing ahead faster with its demat shedule. The National Share Depository is doing a great job so far and the Central Depository has yet to take off so maybe it is the right time for SEBI to investigate some recurring problems in NSDL8217;s system. When there was a problem with the system in March this year, it was the Stock Holding Corporation that was held responsible, but a few days later there was a tiny, quickly controlled blip with Global Trust Bank too which was not even probed. There was another minor problem with processing auctions, but since it pertained to NSE alone, it was quickly dealt with. Last week 35 NSE brokers failed to make pay-ins in time because the NSDL did not respond to order inputs. The NSDL8217;s positive image helps, but the regulator would do well to ensure that the system isreally geared to take on the additional demat. After all, one cannot have a situation where demat trades can ever be settled physically again.

8212; Author8217;s email:suchetadalalyahoo.com