Sucheta Dalal :Not just Numero Uno (5 Oct 2003)
Sucheta Dalal

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Not just Numero Uno (5 Oct 2003)  

Film star and producer Sanjay Khan’s Numero Uno is among the many film and television companies that dumped equity at astronomical prices on Unit Trust of India (UTI) under the chairmanship of P. S. Subramanyam during the Ketan Parekh-led boom.

UTI continues to struggle to salvage its Rs 5 crore investment in Numero Uno’s equity at an outrageous Rs 500 per share and has long ago realised that the company’s foolhardy promise to ‘compensate UTI for any loss in the transaction’ is quite meaningless. What isn’t so well known is that Numero Uno is not the only Sanjay Khan company that UTI invested in.

It had also bought Rs 10 crore worth of Optionally Convertible Cumulative Preference shares and Non-convertible Debentures worth Rs 4 crore bearing fairly high interest rates of 15 and 16.5 per cent respectively to finance World Resorts Ltd.

This luxury resort on the outskirts of Bangalore had become a hot conference destination when super-star Hrithik Roshan was married to Khan’s daughter there. UTI Mutual Fund has sent out recall notices to the company charging that it had defaulted on interest payments, failed to meet the staggered redemption targets and has not even issued share certificates to it.

Last heard, Khan was trying to negotiate a settlement with UTI to avoid prosecution. Maybe UTI ought to check out the balance sheets of Numero Uno and World Resorts and examine their investments and dealings with two private companies —Brightstar Investments and Sunrama Exports to find out how the money has moved.

Rs 20 cr write-off?

Although UTI is reluctant to write off part of its investment, Sanjay Khan has been far more successful in persuading our beleaguered Development Finance Institutions (DFIs) to write off a hefty Rs 20 crore on account of the very same World Resorts Ltd through a one-time settlement. The institutions that had financed Khan’s resort are —Tourism Finance Corporation of India (TFCI), IFCI Ltd and Industrial Development Bank of India (IDBI).

All three institutions have already restructured the loans granted to World Resorts once in March 2002. Recent documents available with this writer show that they are quite happy to oblige the actor with a second restructuring proposal involving another write off.

In August, IDBI agreed to accept just the principle sum of Rs 13.35 crore, with the interest of Rs 6.30 crore converted to zero coupon OFCDs, involving a hit of Rs 6.54 crore. Similarly IFCI agreed to forgo Rs 6.5 crore on its outstanding of Rs 25.53 crore and TFCI was willing to take a knock of Rs 7.03 crore on its residual exposure of Rs 26.53 crore.

As always, the institutions hold personal guarantees from Sanjay Khan and his wife, which are of little value.

Only Damodaran

The government is trying to resolve UTI’s conflict of interest situation by ordering a new set of four new banks to replace its existing sponsors. But even as it does that, it continues to create new conflict situations. A reader wrote to say, ‘the government seems to have only one solution to all its problems —M. Damodaran’.

Although Damodaran may indeed be the answer to all problem situations, his appointment as IDBI chairman, albeit a temporary one, creates some curious contradictions. He already rides two horses as head of UTI-I and UTI-II with IDBI as the third. As chairman of IDBI, he would also be the de facto chief of the National Stock Exchange (NSE). Not to mention the fact that until the government merges IL&FS and IDFC, UTI carries a lot of clout at IL&FS as its biggest shareholder.

Surely, this makes Damodaran one of the most powerful persons in the Indian financial sector. Yet, the grapevine says that he is not interested in being IDBI chairman and after his recent elevation to the rank of Additional Secretary, would quit after initiating the restructuring process.

Maddening Ban

India’s IT bureaucracy continues to play the thought-police by crippling access to Yahoo groups through a mindlessly ordered ban Hundreds of Yahoo! Groups discussing issues such as civic affairs, literature, religion, infrastructure, corporate governance, health and corruption are fretting at the on-now-off-again gimmicks pulled by their ISPs (Internet Service Providers) on orders from the government’s Computer Emergency Response Team.

The block was ordered when Yahoo refused to remove the secessionist ‘Kynhun’ group, which carried postings of the Hynniewtrep National Liberation Council. Net users however say that even computer illiterate secessionist groups know how to work around the ban, which is not even consistently imposed across all ISPs around the country.

Consequently, the government’s inability to get Yahoo to listen to it, or to enable ISPs to block one malignant group without a complete shut down is making a laughing stock of India’s so called IT prowess and only hurts genuine groups.

-- Sucheta Dalal