Sucheta Dalal :History repeats
Sucheta Dalal

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History repeats  

Feb 12, 2006

How seriously can one take Indian corporate houses when they talk of corporate governance? In 1999, Gujarat Ambuja Cement Ltd (GACL), a well-run, bluechip company blotted its copy book with a two-stage acquisition of ACC shares from the Tata group. The deal was designed as a strategic investment to avoid paying retail investors the same price as the Tatas. Despite investor outrage, GACL and the Tatas were allowed to violate the spirit of the Takeover Regulations on technical grounds. At that time, GACL tried to cover its actions in nationalistic colour by raising the bogey of ‘‘foreign cement majors taking over Indian business’’. In 2005, it quietly began a sell-out to foreign cement major Holcim in a complicated four-part deal cloaked in the garb of a ‘strategic investment’. Top company executives continued to vociferously deny our charge that the ACC strategic-sale was a precursor to a similar deal in GACL and marked the beginning of a quiet exit by the Seksaria-Neotia families. In 2006, history repeats itself. The 14.8 per cent sale to Holcim is a repeat of the ACC deal and structured to avoid an open offer. This time, however, Holcim has avoided criticism by offering to make an open offer, but with a catch. Holcim will pay the promoters a premium of Rs 15 (price of Rs 105 per share) as a non-compete fee, while the open-offer to ordinary investors is at a price of Rs 90. Retail investors are again being told that they do not merit equal treatment. In a raging bull market, with GACL quoting at just a shade lower, the open offer is unlikely to attract investors.


Luring customers


India’s 15 million credit card holders are slowly realising that the Reserve Bank of India’s (RBI) tough guidelines issued last year have only had a marginal impact on aggressive card issuers. The number of complaints continues to be high, while the redressal record remains poor. Issuers offer attractive benefits to lure customers and withdraw them when the marketing blitz had lost its efficacy. Citibank Gold has withdrawn all insurance facilities that were offered with the card and now it has even withdrawn lounge facilities at airports, says activist Veeresh Malik. Also, credit card companies have arbitrarily hiked interest rates (as service charge and interest on outstanding balance) from 1.5 per cent a few months ago to 2.95 per cent and later to 3.10 per cent without adequate announcements, explanation or warning to card-holders. In fact, most customers became aware of the higher charges only after they were already levied, when in fact they ought to allow them the option of closing their cards. Is the RBI watching these developments?


Ignoring grievances


RBI’s new credit card rules require banks to resolve grievances within a fixed period or face penalties, but customers continue to be given the run-around. Bharat Joshi complains that HDFC Bank’s Direct Selling Agent collected a vast amount of documentation along with his application form sometime in November 2005. He was promised a card at the end of December, but at the end of January, he is still waiting. Joshi is worried that confidential and personal information collected from him may be misused by the agent but so far his attempt to call the bank has only elicited automated replies and a list of perpetually busy numbers. Gaurav Jain and his father are fighting a losing battle to cancel a credit card offered free for a year by ABN Amro. They no longer want the card, but the bank seems deaf to their requests to cancel the card but diligently raises bills for renewal fees. Don’t the RBI rules require positive consent from the card holder when a free card turns into a paid card? In any case, why are customers still hassled about card cancellation?


Catching the greedy


The research head of a foreign brokerage has been heard claiming that the Sensex will touch 10,500 before the budget given the furious pace of the rise. After that, it is anybody’s guess. Going by Friday’s closing of 10100, it would seem that some powerful bulls are indeed propelling the Sensex towards this promised mark. But their reasons are not yet clear. Meanwhile, a cabal of dubious operators is getting set to relieve greedy investors of their money. A Chennai-based Fund Manger received an SMS message offering a ‘‘monthly return of Rs 5000 on an investment of Rs one lakh (minimum)’’. The portfolio management scheme promises bluechip investments such as ‘‘Tata, Reliance, VSNL, Infosys and SBI’’. A call to the given number (42135000) established that the offer was allegedly from a National Stock Exchange (NSE) brokerage called Eglobe at Kodambakkam, Chennai. The lady who answered the phone also said the customer would get 12 post-dated cheques and ‘‘full security’’ for the principal. The NSE website shows no record of Eglobe, either as a Member or a sub-broker, suggesting that this is nothing but a brazen attempt to raise quick money and run.


-- Sucheta Dalal