It has been a long and hard search to find an appropriate person to lead the capital market watchdog body. Different names were considered and rejected until the very last day, but finally the government sensibly opted for a person who understands the capital market rather than someone who would learn on the job without the luxury of making mistakes. For M. Damodaran, the challenge at Sebi will be to juggle his daily appointments without causing offence and living up to the extremely high expectations raised by his success at UTI. For the government, it will be a challenge to find a chairman for IDBI very quickly and to bring in someone who can effectively manage its transition to a bank, the ongoing merger with IDBI Bank and most importantly to resolve the Enron problem.
The selection of M. Damodaran as the sixth chairman of the Securities and Exchange Board of India (Sebi) has some interesting factoids for trivia hunters. All Sebi chairmen, with the exception of G.N. Bajpai, have come from the bureaucracy or the Industrial Development Bank of India (IDBI). Damodaran has been with both. After G.V. Ramakrishna and D.R. Mehta, he is the third IAS officer to become the Sebi chairman. He is also the third Sebi chairman coming from IDBI (Dr. S.A.Dave and S.S. Nadkarni were the other two). Damodaran’s appointment also reflects the enormous increase in Sebi’s stature over the last 15 years and the corresponding decline in the Unit Trust of India (UTI). In 1991, Dr. S.A. Dave was happy to take over UTI after having been the market regulator; in 2005, Damodaran’s appointment to the Sebi post is seen as an elevation in his stature and responsibility. Damodaran is expected to bring the best and worst of IDBI and the IAS to Sebi. What then can one expect from the new regulator? On the plus side, he will not be over-awed by diktats from Delhi, he will know how to deal with political pressure by distinguishing between real threats and threatening noises. Another plus will be an ability to ‘‘work the bureaucracy’’ to push much-needed change. G.V. Ramakrishna, Sebi’s most effective chairman and G.N. Bajpai, its recent one, were sticklers for timing and were scrupulously correct in maintaining appointment schedules. Damodaran, on the other hand, is more like his IAS colleague D.R. Mehta. Visitors are known to have waited for an hour to meet him and there have been occasional bunching of two or three of his visitors.
Reliance Industries, which is embroiled in a bloody war between the two Ambani brothers, is witnessing a curious change in its foreign shareholding pattern. From mid-December last year, Foreign Institutional Investors (FIIs) have steadily sold over Rs 3.20 crore shares of Reliance. But the stock does not seem to have been dumped in the market nor has it depressed prices in any way. Instead, as many as 3.35 crore domestic shares have been converted into Global Depository Receipts (GDR) and the ceiling on such conversion has been reached. Of the shares sold, the sub-accounts of a single investor — Merrill Lynch Espana — offloaded as many as 1.35 crore shares. The regulator probably ought to check what makes the conversion of local RIL shares into GDRs so attractive, or if there is some other mischief behind this change in holding pattern.
Now that Indian Airlines has raised the stakes in the discounted fare game, low-cost airlines may lose their attraction unless they find the resources to tighten their schedules and service. Deccan Airways was a welcome addition to the Indian skies because it forced the aviation industry to cut fares dramatically and offer early bird incentives. But more and more people are beginning to complain about cancelled flights causing real and financial damage to those who hoped to pay low fares. Some consumers complain about having to wait the whole day for a flight to take off. One Kunal Pacheriwala says that in January and February this year, the airline has called up a few days before the scheduled flight to announce a cancellation. In case of the Coimbatore-Mumbai sector, there was a mid-January announcement that flights on the sector were cancelled for the rest of the month! Worse, the airline would only offer a refund and not even change the tickets to a Mumbai-Bangalore or Mumbai-Chennai sector. It happened again in February, and the consumer who also holds tickets for March is unsure if there will be any fights next month. If a discounted fare flight is cancelled, then even if a full refund is offered (which the airline did), it is still a big loss to the consumer. That is because it is usually too late to book a discounted ticket on another flight and a full-fare flight alternative costs at least twice as much. Unless Deccan Airways can get its act together or improve its compensation system, even the steeply discounted fare will lose its attraction for the budget traveller.