Different Strokes

The continuingsaga

The new BSE chief — Anand Rathi — has a tough job. On one hand, he is determined to clean up the exchange and make it as professional as the NSE or better, without disturbing the role of broker directors. On the other, he cannot even begin the clean up until the present mess is cleared, and SEBI’s probe with regard to the June crisis is complete. But SEBI continues to drag its feet. In an amazing disregard for the probe process, the BSE Executive Director R. C. Mathur simply failed to turn up for his hearing — that too after he had sought an extension. The former vice president has not even been given a hearing as yet. Next on the agenda is action against companies that engineered the rigging of their shares and the bailout of brokers. Sources say that the probe is already complete and is explosive. It directly traces the funds to the companies whose shares were ramped up, suggesting a clear nexus with Harshad Mehta. But until the action against the BSE office bearers is complete, nothing willhappen to companies. Will SEBI hurry up and complete its action before it loses its own credibility?

Payment problems

The Essar group’s cash problems are getting serious enough for the FIs to consider some drastic measures. According to employees of Essar Commvision, a group company, cash reimbursements have not been paid since January 1999 to employees outside Mumbai and Delhi. The air-conditioning has been cut off in one office, and even tea and coffee has been discontinued as vendor bills have not been paid. The Mittals’ problems with payment of electricity bills is already well known. The beleaguered groups, particularly those in the steel business, who were seeking a bail out from FIs are now asking for dilution in the condition that funds diverted from projects should be brought back. When will FIs realise that parting with fresh funds to firms in this state will only send good money chasing after bad?

First it was UTI, next is IFCI

As expected, IFCI’s rights issue has simply notakers. Not happy with having bailed out UTI, the government machinery is back in action to bail out IFCI’s rights issue. The usual bunch of suckers, comprising the nationalised banks, institutions and insurance companies are being asked to buy the shares to push the Rs 350 crore plus issue. The question is, will they hold on to the shares after subscribing to them or will they sell. At Rs 11.50, the Rs 10 per share rights give early sellers a fighting chance of avoiding a loss. That is, if one believes that the Rs 11-plus price is a true price and not an artificially one. Most investors believe that the price is propped up and the first sign of selling pressure will see it collapse to way below par. IFCI will then create a record by being the first institution to be quoted below par and set the stage for a direct government bail out of the institution.

Author’s email: suchetadalal@yahoo.com