MUMBAI, AUG 27: If you think that companies have stopped changing their names to take advantage of the booming infotech and biotech businesses, you're mistaken. The practice is still continuing quietly, notwithstanding the crashin infotech stocks two months ago. Companies which are not changing their names or who have already changed their names - are adopting other methods like sub-dividing their shares (which are quoting belowthe face value) to remain in the limelight on the stock exchanges. While nearly 100 companies changed their names to reflect infotech business in the September-March period of 1999-2000, this exercise was haltedtemporarily when the regulators SEBI and RBI stepped in and tightened the procedure. Companies which changed their names recently include IB Infotech(formerly Indian Beverages), Zigma Software (GRML Capital), Natvar Synth (India Online) and so on. Market circles say that at least a dozen more are planning to change their names to take advantage of the infotech boom. Promoters are not restricting their new names to infotech alone. With biotech companies remaining hot favourites on the Nasdaq Stock Market of the US, many promoters are increasingly giving the `biotech' tag. Central Fin has become Gufic Bio Science and Emmessar Chem is now known as Emmessar Bio. ``With the Centre and various states like Karnataka, Andhra and Gujaratgiving fresh sops to biotech companies, I won't be surprised if another 20 or 30 companies change their names reflect the biotech business,'' said an analyst, adding, ``history is likely to repeat in the biotech sector, what happened in the infotech sector will now happen in the biotech sector too.'' Nearly 33 infotech companies in the B2 group of the Bombay Stock Exchange are now quoting below the par value of Rs 10. Most of these companies wereearlier finance companies and subsequently changed their names to reflect the infotech business. The fact that these companies are still quoting below the face value shows that they exist only on paper with hardly any business in the infotech segment. On the other hand, frontline infotech companies have not done badly on the market or financial fronts. Infosys, whichreported a 100 per cent plus growth in net profit in the first quarter of the current year, has gone up by over 30 per cent on the stock market from around Rs 6,000 to over Rs 8,000 in the last one month. The situation is not different in the case of companies which came out with public issues recently. Merchant bankers admit that over two dozen companiesare now quoting far below their offer prices. Most of these companies belong to the infotech segment. This once again shows that promoters have taken advantage of the market situation, but at the cost of investor confidence. SUB-DIVIDING SHARES: Believe it or not, a company which is quoting at Rs 4.90 on the Bombay Stock Exchange wants to sub-divide its shares. The company, SRG Infotec, had called a board meeting on Saturday to approve the proposal. For investors, this may sound ridiculous but promoters are finding such innovative methods to keep their shares in the limelight. SRG is not alone. Datapro Information, another infotech company, which is quoting at Rs 13.80 on the BSE, has also called a board meeting to consider aproposal to sub-divide its shares. If SRG (which was earlier a finance company) sub-divides its Rs 10 stock into ten stocks of Re one each, then the market price of one share will work out to 49 paise. What is thelogic and rationale behind such a sub-division of shares? It doesn't make sense for investors. This is not the way to increase shareholder value. Normally companies sub-divide their shares when share prices goup steeply and become unaffordable for investors,'' said C Murthy, a shareholder of SRG Infotec. SRG's share price has never gone beyond Rs 18 in the last one year and its lowest price was Rs 4. Ditto is the case with Datapro. This shows that the attitude and approach of promoters towards creating corporategovernance and shareholder value has not changed. There was a valid reason for big names like Infosys or Wipro to sub-divide their shares. Infosys had sub-divided its Rs 10 share into two shares of Rs 5 each. The company took this measure when its share price was quoting over Rs 16,000. Similarly, Wipro, Zee Telefilms, Satyam and Hindustan Lever had sub-divided their shares to make them liquid and affordable. While such moves by big companies get considerable media attention, small companies get away with questionable practices. It's time for the regulator to step in and stop such short-changing of investors. The primary market mobilisation has never recovered after the 1994 public issue scam. With such manipulation continuing, it's unlikely that it will recover in the near future.
