Sucheta Dalal :Funny business
Sucheta Dalal

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Funny business  

Aug 28, 2005

C.J. George, Chief of Geojit Securities claims that the idea of bidding for UTI Securities Ltd occurred to his board of directors after a television channel flashed an ‘exclusive’ report, projecting the acquisition by Geojit as a done deal. It caused Geojit’s share price to jump 35 per cent in two days. Lest the media is credited with making deals happen, George tells us that the journalist claimed to have got her ‘exclusive’ information from a ‘UTI Consultant’. Geojit’s board of directors, which met within a day after the ‘news’ caused a price spike, was so enthused by the story that they asked George to make a bid for UTI Securities. George says he followed their direction by rushing to the Kerala State Industrial Development Corporation (KSIDC), a shareholder of Geojit and persuaded it to make an official pitch on behalf of Geojit. Why KSIDC? Probably in the belief that UTI Securities will be sold to a public sector entity and a KSIDC letter would make Geojit’s suit more acceptable. However, KSIDC’s stake in Geojit is down to just 13 per cent, which is exactly equal to that of stockbroker Rakesh Jhunjhunwala, a director of Geojit. Clearly, the regulator needs to identify the UTI ‘consultant’ who triggered off a series of events including a spike in Geojit’s stock price, culminating in a bid for UTI Securities.


Other suitors


As it happens, UTI Securities has many powerful suitors. After all, it is profitable, has nationwide operations, large institutional clients and a presence in several segments of the financial market including commodity trading. Consequently, well before Geojit’s so-called bid made news, LIC and UTI Bank had both expressed interest in acquiring the company. UTI Bank is especially keen. It is the only one that will derive real value out of the UTI Securities brand name and its banking operations will fit in nicely with those of the brokerage company; this makes it a very keen bidder.


Ironically, UTI Bank has a tie-up with Geojit Financial Services and Doha Bank for a ‘Wealth Management’ service at Qatar. Another curious connection is that the Chairmen of Geojit (A.P. Kurien) and UTI Bank (P.J. Nayak) were both former executive trustees of the erstwhile Unit Trust of India.


Processing claims


A month after the deluge, car owners, service centres as well as motor insurance companies in Mumbai are struggling to repair the damage or process insurance claims. This is partly because India’s insurance sector is still largely paper-based. In this situation, Audatex, which is a world leader in ‘end-to-end motor claim processing solutions’ (and a part of the US-based ADP group) is running pilot projects for three insurance companies offering online processing of motor claims that promises to cut down paper work and turnaround time to a few hours. More importantly, says CEO Pankaj Kapoor, it will generate valuable data leading to informed underwriting decisions by allowing insurers to split up and examine claim ratios by car models, dealers, type of repairs or region. Apart from improving speed and service quality, this also has the potential to clean up the insurance business by making it easier to zero in on false claims or corrupt officials.


Neighbourly investment


The booming Indian market is clearly a big temptation for our neighbours in Pakistan. Recently, a Pakistani investor wrote to us seeking advice on the best mutual fund investment in India and the legal formalities involved in transferring money via hundi. He claims that many of his community members ‘‘come to India and invest in post office schemes, Kisan Vikas Patra and Indira Vikas Patra’’, but he is ‘‘not quite sure whether it is legal to do so’’. Clearly, government officials who permit the investment are merely being good neighbours when they don’t check identity or nationality.


Consequently, they don’t require intricate routing through Participatory Notes and tax havens. All it needs is a quick trip to India and hard cash.


Customers beware


Budget airlines have been a big boon for middle-class India, but consumers would do well to check the terms and economics of their operations. Budget airlines, as their nomenclature suggests, operate on shoestring budgets. This means they have no spare aircraft and technical snags or bad weather usually leads to delays or cancellations, leaving passengers stranded. Some airlines like Kingfisher have deep pockets and have compensated angry passengers in the early days; but those travelling Air Deccan need to look up the fine print. The airline, says consumer activist Veeresh Malik, explicitly limits its liabilities by stating that it will operate a point-to-point service on a ‘‘best effort’’ basis. The terms have apparently been filed with the Directorate General of Civil Aviation. This means that the next time passengers refuse to fly after checking in (as they did recently), because some demand is unfulfilled, the airline could rightfully offload them. It probably did not do so because no service company can afford the bad publicity. It also means that anyone flying a budget airline with a time deadline would do well to have an alternative plan ready.




-- Sucheta Dalal