Sucheta Dalal :Different Strokes: BoM responds
Sucheta Dalal

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Different Strokes: BoM responds  

May 10, 2004

BoM responds


In response to our follow-up efforts with the regulator, Bank of Maharashtra’s (BoM) investment banker, Allianz Securities Ltd. has written to us asking for details of investors who received wrong allotments (physical shares instead of electronic credit, or delayed refunds) during the Initial Public Offering. They have promised to handle the complaints speedily.


We also learn from reliable sources that as many as 1,97,000 investors were given wrong allotments. Further, the allotment process remained incomplete until the beginning of last week. Such delays are extremely profitable for banks making IPOs because they get to earn on the hefty float money lying with them. In BoM’s case, its Rs 230 crore IPO was oversubscribed 11 times. On April 22, one of its share application accounts showed withdrawals of Rs 939 crore and a credit of Rs 2153.89 crore. This means that it had a float of Rs 1213.90 crore that day, while it claimed that refund orders had been dispatched on April 5, 2004.


Narmada backtracks


Like several other government owned entities, the controversial Sardar Sarovar Narmada Nigam Limited (SSNNL) also believed that the high-interest regime of the 1990s would last forever. Or, maybe it could only attract funds for the dam project by paying a high interest rate. Hence, its 20 year, secured, redeemable, deep discount bonds, issued in 1993 paid out a hefty interest and had a one-way put option for bondholders to withdraw their money at the end of the seventh, 11th and 15th year. Each bond, purchased at Rs 3,600 was to fetch Rs 1,11,000 on redemption. Investors exiting at the end of the seventh year and 11th year would get Rs 12,500 and Rs 25,000 respectively.


Naturally the bonds were trading at a huge premium in the secondary market. And investors want to hang on to these anachronistically high interest payments at a time when banks pay less than 9 per cent on fixed deposits. So SSNNL’s decision to call a meeting on May 28 and force compulsory redemption of all outstanding bonds at Rs 25,000 has met with outrage. Investors are grasping for reasons to stall the move, after a notice of the meeting published in leading newspapers caused bond prices to crash. The Panipat Investors Forum has written to the Securities and Exchange Board of India (SEBI) demanding that the bondholders’ meeting be declared illegal because the company had failed to announce a book closure. While investors will indeed protest and may even go to court, this time too they seem to be fighting a lost cause.


Feel good rains


Unseasonal and unexpected rains lashed many parts of Tamil Nadu last week, especially the Cauvery delta. This is the first time in two decades that such a heavy downpour has been recorded in May, providing relief from several years of severe drought. The rainfall has filled up various ponds and tanks that had been dug with help of the government to trap rainwater and recharge the ground water. According to sources, the rains may help turn around the electoral fortunes of Chief Minister J.Jayalalithaa. What do the rains have to do with ‘‘Amma’s’’ popularity and administrative performance, you ask? Our Chennai source says — it is all about bringing back the ‘‘feel good factor’’.



Tailpiece: A couple of weeks ago, we wrote that the Bombay High Court had permitted Ketan Parekh to go abroad. And the small matter of nearly Rs 1,000 crore that he acknowledges as payable by him to several banks was apparently forgotten. We now learn that the Esplanade Court has decided to be tougher than the High Court. In a criminal case filed by an influential overseas corporate body, the court grounded him by turning down his request to go abroad.

-- Sucheta Dalal