Sucheta Dalal :Study in contrasts (18 May 2003)
Sucheta Dalal

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Study in contrasts (18 May 2003)  

The turgid brown water of the silted and polluted Mithi river that flows through Mumbai’s swanky Bandra-Kurla Complex, provides a stark contrast to the fabulous new glass and chrome headquarters of companies and financial institutions.

The complex houses Wockhardt, Reliance, the National Stock Exchange, ICICI Bank and Infrastructure Leasing & Financial Services (IL&FS). Then there is Bank of India, which moved into its new corporate headquarters recently and Unit Trust of India (UTI) whose chairman M. Damodaran has shifted office to the suburban premises.

The Bank of Baroda building and State Bank of India’s regional headquarters are being built swiftly and a hotel and convention centre seems to be finally on the cards. What is however not coming up at all is any sign of greenery or beautification in the complex.

Having paid such large sums to lease commercial plots at Bandra-Kurla during the real estate bubble of the nineties, corporate India is disinclined to spend more money on improving the ecology. In fact, the Mumbai Metropolitan Development Authority, which collected hefty sums of money by auctioning the plots, was to desilt the Mithi and beautify the river banks. But with its surpluses repeatedly taken away by the cash-strapped Maharashtra government, MMRDA has done nothing to fulfil its promises.

Conflict of interest After Scam 2000, the Securities and Exchange Board of India (Sebi) quickly realised that having its executives on the boards of stock exchanges lands it in serious trouble. Although Sebi has enunciated the fiduciary duties of board directors, its own directors were fairly clueless about rampant mismanagement and broker-nexus at most stock exchanges.

So Sebi withdrew its nominees from stock exchanges and is in the midst of a larger clean up and has superseded several stock exchange boards. On the other hand, despite the involvement of banks in every scam, the government as well as RBI continue to have nominee directors on the boards of publicly-listed banks.

While the government is at least a majority owner of nationalised banks, the banking regulator certainly has no business having nominees on bank boards. According to bankers, RBI’s excuse is that it is constrained by the provisions of the Banking Regulation Act.

The question is, what happens if Sebi accepts the Narayana Murthy Committee recommendation about withdrawing all nominee directors from the boards of listed companies? Will RBI continue to hide behind Banking Regulation Act and seek special exemptions for listed banks, or will it make a push to remove its nominees from the regulated entities? Since Narayana Murthy himself is on the RBI central board, that is probably the place to discuss the issue.

BoI’s new headquarters Bank of India (BoI) chairman K.V. Krishnamurthy who is due to retire at the end of May, is a satisfied man. In his three year stint at the helm of the bank, he successfully pursued profit growth, reduced staff strength through a voluntary retirement scheme (VRS) and has introduced a unique system of offering long sabbaticals going up to two years or more to employees in order to reduce staff strength.

On the eve of his retirement, bank stocks have finally caught investors’ fancy and BoI’s share price, which was a mere Rs 9 when he took over, has finally crossed its original issue price of Rs 46.50 on May 13. But Krishnamurthy’s big kick seems to come from the fact that he managed to get the bank its own swanky headquarters, complete with extremely high tech videoconferencing facilities and Internet connectivity.

What is more, Krishnamurthy personally supervised the construction ship-shaped building and its interiors and managed to push the cost down to just Rs 62 crore as against a sanctioned budget of Rs 69 crore (minus the land lease cost of around Rs 100 crore).

This is all the more remarkable when you consider that the neighbouring headquarters of ICICI Bank and Infrastructure Leasing and Financial Service cost more than twice as much.

Low profile At one time, the Lafarge group, a global cement major with a presence in 75 countries seemed perpetually on the prowl for acquisition opportunities in India. Almost every cement company up claimed that Lafarge presented a takeover threat.

And its website openly admits that ‘Lafarge is currently taking up positions on Asian markets in its principal businesses’. But our sources say that Lafarge India has suddenly decided to keep an extra low profile. It does not want to be in the news and wants no press coverage. Is that an indication that it is on the prowl again and doesn’t want the media to get wind of potential acquisitions? Only time will tell.

-- Sucheta Dalal