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Tongue-tied FIs
It is one of the tragedies of corporate India that our financial institutions stand tongue-tied when they should be raising a shindig. LIC, GIC, UTI, the term-lending institutions and public sector banks are all guilty of abetting crimes against minority shareholders, including themselves. After investing crores of rupees in several companies floated by big business houses, they quietly stood aside watching the loot of public money and the destruction of shareholder wealth. Post-1991, they again stood and watched as foreign companies gifted themselves cheap shares in their Indian subsidiaries, created competing 100 per cent subsidiaries, and awarded themselves undeserved royalties on products that have always been marketed in India without royalties. They did not even try to obtain fair value for assets like brands owned by the companies they had invested in (eg: Tomco was given at a throwaway price to HLL).All this is surprisingly intriguing since it is in their own interests as both lenders andshareholders to protect shareholders' wealth. The Sterlite bid for a minority stake in Indal should serve as a good test-case of future FI intentions in this regard. Here is a case of an foreign company that has decimated shareholder wealth by a fair degree of underperformance; even when the rest of MNC stocks in the country were soaring, Indal has been a poor cousin. Its foreign parent Alcan has been consistently whittling down its stake in the company over the last few decades; its "professional" Indian management has shown no spark of entrepreneurship for a long time; glib talk and an ability to vibe well with the media alone cannot constitute performance. In such a scenario, any right-thinking FI shareholder should be asking itself: at what price should I get out to get value for my shares? Is the Sterlite bid the right price for me to get out, or is there a better deal to be had by staying on and enforcing performance from the present management? Reports in some newspapers speak of the possibility ofthe institutions seeking a better price from Sterlite in order to disgorge their stocks. If true, this is the way to go. The minority shareholders will benefit if the institutions do manage to wangle a better price. Other reports also talk of the possibility of Alcan seeking to raise its stake through the preferential route. The institutions should stoutly oppose any such bid if it occurs during the pendency of an open offer unless it is offered as a counter-bid to Sterlite's. The institutions, for their part, are trying to read the smoke signals from North Block before they decide. They should grow up. Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
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