Sucheta Dalal :Mumbai reckoning
Sucheta Dalal

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Mumbai reckoning  

Dec 11, 2006

It is another sign of India's growing attractiveness as an investment destination that editors of The Daily Reckoning, a well regarded US based investment webzine made their maiden trip to Mumbai last week. Their reaction was typical of first time visitors to India's commercial capital. Apart from the stifling heat and humidity, it is the drive from the airport that remains the biggest shocker. “We have never seen so many people living on the streets. There were thousands of them asleep on the sidewalks. They have no mattresses. No pillows. They just seem to put a towel down on the pavement and a light cover over themselves. Where do they keep their stuff? Do they have any stuff? What do they do during the day?” wrote their Mumbai datelined newsletter last Thursday. Then there is the contrasting reality in the form of endless advertisements that speak of 'luxury this' and 'exclusive that', pointing to loads of money co-existing with abject poverty. The terrible irony of this contrast was captured by media reports that very morning about a survey saying that the richest 1 per cent of the world's population owns 40 per cent of its wealth. Typically again, the shock wears off after a week of living out of five star hotels and meeting industrialists and large investors in their plush offices and see the truth of the survey. They also learn to ignore the poverty and focus on profits to be made from India's booming capital market.

Application trends

Do retail investors apply to initial public offerings (IPOs) only on the last day last day of the issue? Experts who have analysed retail investment trends say, yes. According to them, retail investors watch subscription trends carefully and put in their application only on the last day. However, nobody has really analysed last day applications in any great detail. Some investors insist that broad subscription numbers do not tell the story. According to them, genuine retail investors usually do not wait until the last day to file their application. It is those who want to gamble on an allotment and have borrowed funds to invest in IPOs in the hope of a quick profit who apply on the last day. One investor points out that over-subscription of the retail investor segment of Info Edge and Shobha Developers were less than five times at the beginning of the last day, but by evening the figure had flared up to 14 times and 17 times over-subscription. Do a big chunk of the last day investors comprise of the Roopalben Panchal variety? After the Securities and Exchange Board of India (Sebi) uncovered the massive multiple-application scam, retail investors think so.

Exiting promoters

When the government opened up futures trading in commodities after a 40-year ban, the National Commodity and Derivatives Exchange (NCDEX) was expected to emerge as the number one commodity bourse. After all, its promoters included the dominant National Stock Exchange (NSE) and ICICI, the leading private bank. NCDEX however has did not manage to replicate NSE's success and ran into a couple of controversies. Over time, its two star promoters have also reduced their commitment to the bourse. The NSE invested in the Multi-Commodity Exchange (MCX) which is the market leader and ICICI Bank, which has already sold a 7 per cent stake (out of 15 per cent) to Goldman Sachs is reportedly looking for a buyer for the remain 8 per cent as well.

Transport hub

Maharashtra's attempt to extract value out of Nagpur's geographical location at the very centre of India has taken another leap forward in becoming India's transportation hub. The Maharashtra Airport Development Company, which is working at developing Nagpur airport as a hub for international cargo services has already attracted the attention of aviation majors such as Boeing and Jet airways. It has now signed a Memorandum of Understanding with Chennai based SICAL Logistics for two other arms of the transportation project. The first is a modern rail terminal will serve the special economic zone (SEZ) being set up in the contiguous area and offer smooth connectivity with the airport development plan. The terminal is eventually expected to have facilities for inbound and outbound container trains along with a Customs clearance and bonding facilities. This in turn will be linked to a state of the art road terminal with truck parking facilities for a peak capacity of 950 multi-axle trucks along with warehouses, cold storage, canteen, stacking yards, garage and support services. Once complete, the Nagpur transport hub is expected to benefit all companies by cutting their transportation time. Over time, it may also emerge as a key exit point for the export of fresh produce, as part of the new agricultural revolution that is being propelled by India's leading corporate groups such as Bharti and Reliance.

-- Sucheta Dalal