Sucheta Dalal :The Enron question (2 Nov 2003)
Sucheta Dalal

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The Enron question (2 Nov 2003)  

When P.P. Vora took over as chairman of IDBI (Industrial Development Bank of India), he came with the distinction of having successfully collected over Rs 1,000 crore for the National Housing Bank (NHB), in the 1992 Scam related dispute with ANZ Grindlays Bank. NHB’s triumph was more due to clever strategy rather than real legal merit. So, when Vora joined IDBI, he was expected to resolve the biggest blob of red in its books—its exposure to Enron’s controversial Dabhol Power Company (DPC). But Vora couldn’t lead IDBI out of the Dabhol quagmire. Instead, he spent more money on ‘preserving the asset’. Now it is up to the miracle man M. Damodaran to clean up the DPC mess. Expectations from him run very high, as indicated by the sharp rise in the IDBI scrip after his appointment. Will Damodaran deliver where so many failed? If he does, it could be a lesson for many so-called professional managers and career bankers.

The DPC problem

After DPC shut operations in June 2001, it remained in suspended animation until March 2002, when the court receiver and IDBI took over. But 30 months later, there is no progress. N.M. Rothschild, which was appointed to work out a revival plan, has asked for a second extension. Meanwhile, Tractabel, which pulled out of a joint venture with Jindal Vijaynagar Steel, did a technical study and pegged the cost of restarting DPC at $15 million. Punj Lloyd limited, which is contracted to preserve the project, works with a team of DPC’s own engineers already trained for the job, but the preservation bill is mounting every day. Informed sources wonder why IDBI sought a paid opinion from Tractabel, when Punj Lloyd engineers could have done the job just as easily. Where DPC is concerned, there are always more questions than answers.

New beginning

HE used to be called the one-man industry. Yet, when Amitabh Bachchan floated the Amitabh Bachchan Corporation Limited (ABCL), it almost ruined the superstar. Part of the reason was the outlandish brand valuation for Bachchan and his wife, unreasonable commitment of personal time and wrong business decisions. But when people were ready to write off ABCL, Bachchan worked his magic again and created history by transcending a few generations and becoming India’s most durable superstar ever. Now Bachchan has relaunched ABCL and paid off his debts. If ABCL finally turns around and silences Bachchan’s critics, it is because he has proved that he is a superb actor, entertainer, a superstar and a gentleman. Over the years, his commercial brand endorsements have been matched by generous support to social causes such as the Polio Immunisation Programme. Now he joins a band of international celebrities such as Audrey Hepburn, Vanessa Redgrave and Harry Belafonte as Unicef Ambassador. The worry, if any, is that his loyalty to politician friends could force him into endorsing some dubious projects.

Cameo performance

Indian Overseas Bank’s (IOB) recent public issue had controversially alloted physical shares to nearly 60 per cent of the applicants, despite investors asking for electronic allotment. It’s registrar, Cameo Corporate Services, responded to investor complaints after two weeks with the fantastic explanation that public sector banks are ‘under the purview of Banking Regulation’ and ‘can issue shares both in physical and electronic mode’. The registrar conveniently forgets that the form of allotment is not the bank’s prerogative. If an investor asks for electronic allotment, it has no option but to comply. SEBI officials confirm this and are inspecting the registrar’s operations. In the meanwhile, Cameo only admits to one error, that of a stock broker who received 36,000 physical shares instead of electronic ones. The registrar insists that over 60 per cent of the investors did ask for physical shares, but the number of investor complaints received by this paper suggests otherwise.

MAPA problem

Narayan Vaghul, chairman, ICICI Bank used to say that Indians are afflicted by the MAFA syndrome—Mistaking Articulation For Action. In recent years, we seem to have contracted another variation of this condition—the MPFP syndrome (Mistaking Publicity For Power). How else does one explain a newspaper survey that allegedly polled people with an average corporate experience of 20 years, throwing up a ridiculous listing of the most powerful people in Indian business? A survey in which single company chiefs, however charismatic, made it to the top five beating the heads of pedigreed business conglomerates; where powerful regulators and institutional chiefs could make it only in the 25-50 category, rubbing shoulders with assorted deal makers and has-been or dubious industrialists. Considering that the media is very effective in creating perceptions about power and morality, if such lists proliferate, corporate executives and management students will soon confuse media-created spin for real power.

-- Sucheta Dalal