Sucheta Dalal :Buyback and the marketplace (31 March 2002)
Sucheta Dalal

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Buyback and the marketplace (31 March 2002)  

It is not investors alone who are all worked up about the increasing number of listed companies, especially multinationals, who are buying back their shares and going private. Indian industrialists too are worried that they will no longer have access to the production data and financial numbers of their competitors once they get delisted. On the other hand, with segment-wise reporting becoming mandatory, companies will be disclosing more information than ever. Leading industrialists who met the Sebi chairman recently, drew his attention to this unequal situation where MNCs would get detailed access to their operations and they would have nothing on the competition. These industrialists, led by Bajaj Auto chairman Rahul Bajaj said that government ought to pay attention to the information needs of Indian industry. They want Sebi and the DCA to figure out a way of making a minimum amount of information available in the public domain and accessible to the competition. The problem is, can a private company be forced to disclose as much information? Should the fact that annual reports are submitted to the Registrar of Companies suffice? While one understands the concerns of businessmen, the solutions are neither easy nor obvious.

CRB to return?

It is more than five years since the spectacular collapse of the CRB Group led to millions of shareholders losing their savings. This triggered a run on several hundreds of NBFCs that had thrived under the high interest regime by raising money through fixed deposits. Just as investors have begun to give up hope, CRB has sprung a surprise by calling a meeting of all secured and unsecured creditors and shareholders of the company with the approval of the Delhi High Court to seek their approval for a revival scheme. Although RBI had filed a winding up petition against CRB, it is now arguing that its revival is in the best interest of all stakeholders. The Court has also dismissed applications filed by the Official Liquidator seeking to freeze the personal bank accounts of the directors. Interestingly, a press release about the revival that was sent to this writer was extremely short on detail and has no specifics about the exact revival proposal and if it is benefits of any of the stakeholders. For instance, will Dr C.R. Bhansali be back at the helm? Were this to happen, it would create a history, especially since the CBI seems to have forgotten about the case after arresting Dr Bhansali who was absconding after the collapse. The lesson would be that no matter how many investors lose their savings, Indian companies and their promoters remain unaffected. Moreover, it is not clear what has happened to the cases filed by investor activists such as BJP MP Kirit Somiaya in Mumbai.

Where are the investors?

If the two share depositories, which together have around 40 lakh depository accounts cover over 99 per cent of secondary market settlements then what is India’s investor population? It is almost like a trick question. Various experts claim that India has a two crore of investor population. However, the depository data suggests that the number may actually be half or less. As it turns out, a significant percentage of so-called investors own just one, two or three stocks each. Who then are these people who own stocks but are passive participants in the capital market? A reader tells us that a significant number of the single-stock owners may be people with ESOPs. Since many public sector companies have been handing out ESOPs, the number of such ‘investors’ is fairly significant. Most of them have not opened demat accounts and don’t quite know what to do with their shares. This only indicates that there is a need for another detailed investor survey in order to verify the real investor population.

Mixed signals

Cellular operators need to do to some introspection about the huge churning of subscribers. Part of the churning is probably from people who freely distribute their mobile numbers and later don’t want to be contacted by those people anymore. But a large chunk is also due to confused billing systems. For instance, Mumbai is painted with orange hoardings to announce that long distance rates have dropped 70 per cent. Another message says that national roaming charges have dropped 65 per cent, STD rates have ‘more than’ halved, airtime charges are down to Rs 3 a minute. How does one decipher what this means to monthly bills? Although the TRAI promised to make systems more transparent there is no sign of it happening as yet.

-- Sucheta Dalal