Sucheta Dalal :Bad values (26 Oct 2003)
Sucheta Dalal

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Bad values (26 Oct 2003)  

On October 10, the Securities and Exchange Board of India (SEBI) barred 12 companies and all their directors from the capital market for five years for failing to redress investor grievances. Three out of these were Indo Biotech Herbal Remedies, Indo Biotech Foods and Good Value Marketing. All three are located at Merchant Chambers, Hill Road, Bandra. The two Indo Biotech companies have a common director in Dilip Dahanukar, while Good Value Marketing and Indo Biotech Foods share the same office.

Yet, while the first two had their directors barred from the market for failing to redress investor complaints, Good Value was let off with a mere warning because it quickly redressed all 74 complaints pending against it. Significantly, SEBI’s order omits to name the directors of Good Value Marketing, and its investigation team apparently found nothing intriguing about Good Value alone, among the three, redressing all grievances. But investors want to know why Good Value’s directors have not been named in the order, especially when many of them would automatically be barred due to their presence on the other two companies.

Diwali gift burns a hole

SEBI delivered a pre-Diwali blow to debt market brokers dealing in the massive Rs 300,000 crore market for unlisted debt. SEBI’s intention was to force full disclosure (initial and continuing) of unlisted, privately placed debt, which accounts for a majority of the non-government debt securities issued over the last few years. But instead of cracking down on issuers and forcing them to list their issues, it issued a convoluted circular ordering all trades barring spot deals to be executed only through stock exchanges. Further, it said that intermediaries registered with SEBI would be held responsible if they associated themselves with the issuance of privately placed unlisted debt. The National Stock Exchange (NSE) interpreted this as meaning that only listed debt would be admitted for trading and brokers could not issue contract notes for any trades other than those in listed securities.

However, brokers conduct a substantial portion of their business in unlisted debt and issue off-the-exchange contract notes for such trades, which are then reported to the exchange. But the NSE immediately issued a circular and decreed that brokers couldn’t issue contract notes for unlisted debt.

This meant that a hefty chunk of their business was shut down overnight. Brokers and their debt market clients - mainly banks and insurance companies - are trying to get the regulator and the bourse to see sense. After all, the entire purpose was to force listing and disclosure by companies issues privately placed debt, and not to close down brokers’ business. But nobody is quite clear whether the clarification has to come from SEBI or the NSE. In the meanwhile, the trading in unlisted, privately placed debt has come to a complete halt.

Cannot bank on them

Last week we reported that investors to the recent public issues of Indian Overseas Bank (IOB) and the United Commercial Bank (ICO) were allotted physicl shares, even when they applied for electronic credit. A stunning half of IOB’s investors, and 25 per cent of UCO Bank’s investors were allotted physical shares. UCO’s registrar, Karvy Consultants of Hyderabad said that physical shares were allotted when there were mistakes in the application form, or the depository number was unclear. But a couple of readers say that they got physicals even after submitting electronic, on-line applications, where there is no possibility of mistakes.

After investors complained, Karvy Consultants at least made a serious effort to correct the damage. In many cases, it collected the physical shares and converted them to electronic form at its own cost. It has even offered to consider compensating one investor. But Chennai-based Cameo Corporate Services, which handled the IOB issue is unconcerned and has not even replied to our queries. With SEBI launching an inspection of the two registrars’ organisations, there may be light at the end of the tunnel for investors to the two bank issues.

Cycling back

In developed nations, roads for gas-guzzling cars swallowed up bicycle lanes as a part of the development process; but environmental consciousness brought them back full-circle. Will it happen in India too? Sridhar Narayanan of the Delhi Metro Yahoo groups says that India too had proper bicycle tracks.

“Delhi actually used to have bike lanes in central areas like ITO and Connaught Place. I distinctly remember even bicycle signals (like signals for pedestrians but with a red bicycle for stop and green bicycle for go) at some junctions,” says Narayanan. Chennai even had bicycle lanes (on Sardar Patel Road) as recently as five years ago and on Beach Road some time before that, he says. Now that the Delhi Metro is paying attention to special bicycle stands, will they come back in fashion and make Indian cities more bicycle friendly?

-- Sucheta Dalal