Consequently, the public issue went for a toss, and the other two exchangeshad to cancel all the transactions that had taken place in RJL's scrip.

Finally, RJL refunded the public issue amount! A situation like RJL's aroserecently. When BSE was still seeking clarifications on its issue allotments,the Pune-based software major Kale Consultants Ltd (KCL) somehow managed toconvince its regional stock exchange at Pune (PSE) to start the scrip'smuhurat trading on November 11, 1999, as that day was considered veryauspicious by the company! On November 12, a representative of the company's"post-issue lead manager", ICICI Securities, claimed that the matter hadbeen taken up with PSE and trading would be suspended by PSE till BSE giveslisting permission. To one's utter dismay, not only was KCL's scripcontinuously traded on the PSE without a concurrent clearence from the BSEbut, even the stock exchanges at Bangalore, Ahmedabad and Chennai permitedtrading in KCL shares even though the scrip was never to be listed on theseexchanges! What's more, before complying the listing formalities with BSE,the company contemplated listing at NSE too!

The trading in KCL shares has finally started at BSE this week, on November24. By granting trading permission to KCL, BSE might have averted an anothercrisis. But, many a question still remains unanswered. First, why the otherstock exchanges are not as stringent as BSE in adhering to the listingformalities? Second, before obtaining the listing approval of the otherexchanges where the share was proposed to be listed, how can the regionalstock exchange unilaterally allow trading in the scrip? Third, how do theexchanges allow trading even under `permitted category' in shares which arenot only unlisted but also in low volume? Four, who is responsible for thedelay in completing the listing formalities? In KCL's case, the merchantbanker blames the company for not providing the details to the BSE on time.

But the company passes the blame on to the merchant banker for not advisingthem properly! And, on the exchange authorities' part, competition seems toforce many a stock exchange to have a `devil-may-care' attitude, whilegranting permission for listing or trading. Of late, the so called publicinstitutions appear to be concerned more about broadening their revenue basethan investor protection!

As regards KCL's listing price, on its regional exchange at Pune, thescrip's muhurat started on November 11 at Rs 300, that is two and a halftimes the offer price of Rs 120. The day after, on the Bangalore exchangewhere it was permitted for trading on November 12, KCL opened at a higherrate of Rs 330. Nearly a week later, the scrip was simultaneouly permittedfor trading at Chennai and Ahmedabad exchanges but, at a differential priceof Rs 305 and Rs 285 respectively. Thirteen days after it was listed on PSE,the scrip registered its maiden quote on BSE at Rs 340 which, incidentally,is the highest price recorded so far by the scrip. Currently, except inAhmedabad where it started with a low rate of Rs 285, the scrip is placed ata discount to its muhurat quotes. Nevertheless, the present price is stillmore than double the offer price of Rs 120. Interestingly, KCL's publicissue of 31.87 lakh shares aggregating to a value of Rs 38.25 crore, whichwas first claimed to have been oversubscribed 66 times immediately after thepublic issue in September 1999, was actually subscribed 72 times, as per the`basis of allotment'! The portion for small investors was subscribed 31times and the large investors' portion was subscribed as many as 113 times.

The company reportedly received over 1.56 lakh applications of which onlyabout 31,000 got some allotment. Hence, considering the public response, thepresent market price of around Rs 280 looks low. Moreover, KCL's projectedbottomline of Rs 8.75 crore for fiscal 2000 against the post-issue equitybase of Rs 11.50 crore yields an EPS of Rs 7.61. The current market pricediscounts this EPS about 37 times which, compared to the discounting of someof the lesser known software companies, may look very comfortable.

In terms of business, KCL has already proved its worth in core segments like airlines, banking and health care. In fact, it claims to be the only Indiansoftware company catering to the airline industry. KCL is said to haveearned nearly 40 per cent of its total revenue from this segment last year.Banking and healthcare reportedly contributed 30 per cent and 10 per centrespectively. The company is now eyeing insurance for its future growth.

Thus, the company's immediate propects appear to be fairly secured.Even while the current exorbitantly high discounting of software scrips isunjustifiable, one major factor that could affect the share price of KCL ina big way in the short run is the low cost of holding by ICICI. In KCL'spost-issue equity of 1.15 crore shares, ICICI holds nearly 22 per cent,whose average cost of holding is less than Rs 20 which is just one-sixth ofthe cost of public holding! In other words, KCL's share price is going to beat the mercy of ICICI in the forseeable future.

(Arranged by INVESTAR - The Aarthik News & Research Syndicate) [E-mailfeedback to: investar@bol.net.in]