Sucheta Dalal :FM's assurance (15 December 2002)
Sucheta Dalal

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FM's assurance (15 December 2002)  

In response to a question, Finance Minister Jaswant Singh assured the Rajya Sabha last week that companies would be asked to offer a minimum 25 per cent of their capital to the public at the time of listing. He agreed with MPs who said that a 10 per cent public offer requirement was far too low. The FM’s assurance to Parliament presents the Securities and Exchange Board of India (Sebi) with a fait accompli that will force it to amend several of its regulations.

The action will also cause a lot of heartburn among companies planning large IPOs. At the height of the market mania of 2000, Information technology companies lobbied Sebi to have the minimum issue size reduced from 25 per cent of capital to 10 per cent. This allowed them to raise money at high premia by parting with very little equity.

In December 2000, entertainment, media and telecom companies were added on to the special category, followed by infrastructure companies. Other companies then demanded parity and got it, on condition that the minimum offer size would be Rs 100 crore or 20 lakh shares.

Interestingly, the Sebi board had cleared the reduced minimum offer requirement after the regulator manipulated the recommendations of its primary market advisory committee (the committee had agreed to a 10 per cent offering only if the issue size was not less than Rs 250 crore).

More recently, another Sebi committee had suggested that the minimum public float to be increased to 25 per cent again, but it was shot down because the takeover rules would have to be changed too. Now the FM’s statement gives Sebi no choice, but one can safely bet that angry companies resume their hectic lobbying to try and stall the move.

Renaissance ends

While on Cyberspace Infosys, Sebi has ended the seven-year dream run of Rakesh Mehta of Renaissance Securities when it debarred him from accessing the securities market in any manner. Mehta, who enjoyed a close association with a former Sebi chief and thrived during his tenure, has been in trouble in connection with Unit Trust of India’s controversial Rs 32 crore purchase of Cyberspace Infosys shares through him.

There were also allegations (later denied) that Mehta had paid bribes to the UTI officials on behalf of Cyberspace. Interestingly, contrary to its recent practice, the Sebi release gives no reason for the action against Mehta.

Stubborn BSE?

Its over a year since Sebi sacked the Bombay Stock Exchange board, had the bourse elect a new set of directors and empowered some long-standing independent directors to run the bourse.

Yet, Sebi can’t seem to get the BSE to listen to it, or stop it from delaying and dragging decisions that would hurt powerful brokers. Last week the bourse, for the nth time, postponed a decision on some controversial trades by Century Consultants, a brokerage firm owned by the notorious Arvind Johari of Cyberspace Infosys. Johari, it may be recalled, had ramped up his share prices to a high Rs 1,480 through a set of brokers. In August this year, the National Stock Exchange annulled 14 trades that were ‘vitiated by fraud and manipulation’ and prevented innocent investors from losing money.

But the BSE has been stalling a similar decision because it would hurt powerful brokers. It has now decided to seek more clarifications from all the affected parties before making a decision. Design Auto and Enmel Finance are two other cases in the same boat.

In all cases, the BSE has ignored persistent prodding and inquiries by Sebi and the finance ministry until the regulator actually looks helpless and ineffectual.

Coffee time

When the Barista parlours initially began to mushroom around the country’s metros, the message boards plastered with mushy teeny-bopper messages declaring it the ‘coolest’ hangout seemed to declare their prior claim to the premium coffee chain.

Also, the granites and iced coffees seemed to move faster than the classic Italian hot beverage. But with prices having gone up a few months ago, one notices a change in the client profile. It now has more of the thirty-plus corporate types who desperately needed a non five-star meeting place.

The type of people who want to trade some of their power-lunches for timeless cappuccinos and a snack, in just the right ambience, to catch up on the corporate grapevine. But Barista shows no sign of having noticed the difference; otherwise, its high calorie snack counter would have reflected the change too.

-- Sucheta Dalal