Sucheta Dalal :Competing Dots
Sucheta Dalal

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Competing Dots  

May 14, 2007

Ever since foreign investors showed the willingness to shell out hefty valuations for a stake in the two national bourses, there is renewed investor interest in running, creating, acquiring and modernising stock exchanges. The latest is an ambitious plan to revive the practically defunct Delhi Stock Exchange (DSE) by first putting in place a sophisticated, automated system called Delhi Online Trading System 2007 (Dots-07), replacing the entire existing hardware and software. This will include broker-office automation, clearing and settlement systems and interface with depositories with scope for rapid expansion. Some of the biggest technology teams are in the fray to bag the automation order. They include Financial Technologies (FT) owned by Jignesh Shah, who set up the Multi-Commodity Exchange (MCX), CMC Ltd, ENC Software Solutions (now called Marketplace Technologies) and one Mikroz Solutions. Interestingly, NSEIT, which probably has the best pedigree to make such a bid, showed initial interest but is no longer in the running. But then NSEIT has yielded ground to FT in developing broker back office software, too, and is now a distant second. The NSE, which is otherwise aggressively competitive, is relatively soft with FT; it even stunned the market by acquiring a 5 per cent stake in FT-promoted MCX although NSE was one of the original promoters of MCX’s rival, the NCDEX.

Takeover moves

A couple of years ago, when the government mandated demutualisation of bourses, it triggered a rush by the broker consortia to take control of DSE, which had then seemed ripe for the picking. The Securities and Exchange Board of India (Sebi) has limited individual shareholding to 5 per cent, overriding the Ananthraman Committee’s recommendation to permit 26 per cent ownership to strategic partners. The Sebi rules initially put off investors, but since the emphasis is on shareholding rather than management control, some large entities are again working at a possible takeover of the Delhi Stock Exchange through an informal consortium that will own 5 per cent of the equity each, but will yield decision-making and leadership to a single entity. Sometime ago, a bunch of big BSE brokers were attempting a similar formula to control India’s oldest bourse, but they seem to have give up their plan. Meanwhile, several exchanges, especially NSE and MCX, are quietly jostling for permission to set up an exchange for small & medium (SME) companies. The BSE was first permitted to set up an SME platform called Indonext, which has languished and the field is wide open again. The booming SME sector has increased the need for such a bourse. Unfortunately the regulator is unable to come up with a model that will ensure liquidity and not end up as another failed experiment like the OTC Exchange of India or even Indonext.

Defamed whom?

A strange media report in a frontline Chennai-based newspaper has perplexed the new management at the Stock Holding Corporation of India (SHCIL). The agency report quotes Bharat Momaya, referred to as a vice-president of SHCIL, saying that a Mumbai Court has “issued summons to a former member of Singapore Parliament (Ramasamy Ravindran) for allegedly making defamatory statements against” SHCIL. The report attributes the action to SHCIL’s managing director R Jayaraman Iyer, who has been sent on compulsory leave prior to a management change in April. The report says that Ravindran is being sued for making negative comments about the e-stamping business. Ravindran has, in fact, made serious charges against the SHCIL management and sent copies of his statement through his lawyers to the finance minister, the regulators, government investigation agencies as well as the Central Vigilance Commission. The new SHCIL management says that it has neither filed any case nor has the board of directors given any approval for such as case. According to the SHCIL brass, the case has been field by Momaya in his personal capacity, which is very unusual. Momaya, we are told, works for SHCIL Services Ltd (SSL), which was once a fully owned subsidiary of SHCIL but was hijacked by three unknown private entities when 76 per cent of the capital was surreptitiously transferred to them. Ravindran says that he has no knowledge of any summons. On the contrary, he has written to SSL asking why his name continues to appear as a director when he has already resigned and his resignation has been accepted. He has also questioned SSL’s attempt to claim that the e-stamping deal with Crimson Logic was signed in February 2007, although the deal was announced at a well-publicised public function at the Taj Mahal hotel on March 23 , 2006.

Acting slowly

Meanwhile, action at SHCIL is at a crawl. According to a director, even Pramod Kumar D Pramanik, a former police officer who has been accused in a case regarding the issue of an illegal passport to Aminabi Kaskar, the mother of gangster Dawood Ibrahim, continues to remain at SHCIL. So do two senior officials charge-sheeted in the past. While the original plan was to induct two new directors in addition to R K Bansal, that is yet to be done an entire month after the former CMD, R Jayaraman Iyer, was sent on leave.

-- Sucheta Dalal