February 21, 2000

Vanishing company case reappears
The vanishing company case has made a reappearance to coincide with the SEBI chairman’s new term. Tired of waiting for action against ‘vanished’ companies, Midas Touch Investors’ Association has moved the Lucknow High Court again for non-compliance with its order dated March 26, 1999. The Court had then disposed off a plea on the assurance of SEBI and the DCA that they had set up a joint co-ordination committee and seven task forces to trace vanishing companies and they would be punished. Midas Touch’s fresh writ petition before the Lucknow Bench of the Allahabad High Court says that the government and its regulators have done nothing to comply with the previous order. Last Friday, Justices H A Raza and R D Mathur issued notices to the various respondents such as the government, SEBI and the DCA to show what action has been taken by them in at least the 80 companies which SEBI confirms as having vanished. Midas Touch has alleged that the regulators have initiated no action against the promoters to prevent further siphoning of funds. No attempt has been made to trace end use of funds raised for a specific project. It also charges that the list of vanished companies is at least 148 as against SEBI’s 80. Also, in the 38 companies where notices have been served by SEBI, these have neither been publicised through a public notice or advertisements nor any attempt made to name the other directorships of those notified.

The Wipro price
ONLY 20 per cent of the Wipro stock is with the public and a newspaper which carries daily updates on these things says that Azim Premji is the world’s third richest man. Since the company is small and its floating stock miniscule, the price only makes the country and our capital market look ridiculous. Bill Gates and Warren Buffet are certainly not hammering on our doors for a listing on the Indian bourses. In fact, the brazen rigging of the tiny stock is a clear case for SEBI to probe who is buying the shares and what drives their belief in higher valuations for the stock. But nothing is happening.

IDBI to bail out IFCI
SO a beleaguered IDBI, worried about its own bad loans, has been arm-twisted by the government into bailing out an even more distressed financial institution — the IFCI. The repeated extensions to IFCI’s rights issue is a clear indicator of the extent of IDBI’s reluctance. Yet, it is not only pushing the issue through but even funding its restructuring. The cost: at least Rs 670 crore. The bailout of the FI is probably only an indicator of other areas where the Finance Ministry would simply cave in and opt for soft solutions. IFCI is a classic example of reckless lending by past chairmen and management. No measures were initiated to disgorge funds lapped up by at least three to four large groups which were the special beneficiaries of previous largesse form IFCI. By forcing IDBI to bail it out and maybe even merge IFCI with it in future, the government is not only endangering IDBI’s health but is also perpetuating a system which allows reckless managements of public FIs. The three sick banks — Indian Bank, UCO Bank and UBI — are still waiting for their dole. Here too bank unions have squarely pointed to the reckless lending to corporate houses. As much as IAS officers and politicians, the CVC needs to find out why FI and bank managers responsible for shady loans have never been nailed.

Bhadrawati guarantee lapses
First there was the problem of the Mittals not being able to pay for the power it purchases for its steel units in Maharashtra. Now it is almost curtains for its own power project, which has been languishing for years. The ambitious Bhadrawati power project was one of the original seven fast track projects which were given a sovereign counter-guarantee. It lapsed in January since the promoters could not achieve financial closure. Also, Maharashtra itself has a power surplus situation with Phase I of Dabhol Power alone being commissioned. Logically, Bhadrawati should die a natural death, but whether it will or won’t depends on the political manoeuvres that will go on behind the scenes.

 

Updated weekly.

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

Other columnists:

Other articles by the columnist A pointless apology? Multiple remote controls Learning about technology The market is wrong The Rs 20,000 crore question Y2K = More advances MTNL's net tariffs No wealth creation please Backdoor to advice BPL, Videocon and Sterlite Who gets the SEBI jobs? The Mayor and the RBI Governer A pie in the sky? Speeding up the Special Court The dot - con Game