December 20, 1999

No wealth creation please

Tata Consultancy Services (TCS), India’s most respected software company surprises us. Its Vice Chairman F C Kohli said last week that TCS has no plans to go public and it doesn’t need the money. Isn’t it a pity? Even if TCS doesn’t need the money Tata Sons could surely use it if it has the vision to encash on a one-time opportunity. By selling just 25 to 30 per cent of TCS equity it can wind up the Brand Equity collections from group companies and have money left over to raise its stake in Tata companies. It can help create real wealth for itself, its shareholders and employees. It is this ability to create huge wealth and setting high standards of corporate governance that has created a near iconic status for Infosys in so short an existence. It is this reason why F C Kohli is fast being replaced by Narayan Murthy as the person who electrified the software business.

Satyam finally clarifies

Finally Satyam Infoway has issued a release to clarify its position with regard to IndiaWorld. It has acquired a company called Indiaword Communications which owns the portal indiaworld.co.in and 13 domains. The domains, it says are unique because they can be accessed directly without going through the portal. The domains are what Satyam says are worth Rs 500 crore. It also admits that the IndiaWorld logo which is used by the domains is under dispute. With the share price suffering a big drop, its statement asks investors to check out the risk factors detailed in the Form 6-K filing with the Securities and Exchange Commission. This says among other things: “We could be subject to intellectual property infringement claims. We do not anticipate paying cash dividends to the holders of our ADSs in the foreseeable future...investors must rely on sales of their ADSs after price appreciation, which may never occur, as the only way to realise on their investment. Investors seeking cash dividends should not purchase our ADSs.” On Internet-related risks they say — ‘‘We may be liable to third parties for information retrieved from the Internet. Because users of our Internet service and visitors to our websites may distribute our content to others, third parties may sue us for defamation... We could also become liable if confidential information is disclosed inappropriately. Others could also sue us for the content and services that are accessible from our website...We do not carry insurance to protect us against these types of claims...” And lastly, the management has the discretion to use ADS proceeds for whatever purpose they wish. That covers just about any complaint that a foreign investor may have.

Doing away with postal ballots

There was a time when SEBI had forced Canbank Mutual Fund to conduct a postal ballot to check if investors were truly willing to accept amendments to its schemes and the returns guaranteed by them. It had forced Canbank to pay the assured return. It is now learnt that SEBI is once again allowing MFs to do away with postal ballots from December — it has decided that a public announcement is sufficient to change the terms of the scheme and trust deed. Clearly the rush of new investors to private MFs has had them lobbying for a relaxation and SEBI is happy to oblige. Investors should note that DSP Merrill Lynch’s MF is the last MF to use ballots to change the terms of the scheme — others will simply place an advertisement and make the changes.

Code for applications

An insider says that the allotment for the two highly fancied software companies which made their IPO through book-building has interesting revelations. Several successful applicants are employees of SEBI. This, say sources, is a complete no-no. Book-building is not a traditional IPO since it gives enormous discretion to the lead manager in allotting shares — and allotment itself is a bonanza. This is considered an unhealthy temptation, and the best investment banks have rules that forbid their employees from applying to issues managed by them. Since SEBI is set to codify corporate governance for companies, shouldn’t it tighten its own rules to stop its employees going the book-building way?

 

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The author's e-mail address is: suchetadalal@yahoo.com

 

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