The Tatas have made no bones about the fact that they find the beleaguered Tata Finance too much of an embarrassment and would be happy to get rid of its stake. This and the appointment of Ravi Parthasarathy, vice-chairman of Infrastructure Leasing and Financial Services (IL&FS) to the Tata Finance board has had electrified the corporate grapevine. According to fairly knowledgeable sources, IL&FS may be looking at a reverse merger with Tata Finance. The advantages are obvious. IL&FS, which is trying to go public for nearly 10 years would get immediate listing. Further, the cachet of the Tata name is so powerful that despite huge losses, Tata Finance continues to quote at a respectable Rs 22-23, which can only be enhanced following a merger. There is also another issue. Unit Trust of India (UTI) which is IL&FS’s largest shareholder after a warehousing operation in 1999 would like to cut its stake or even get out. What is probably under discussion is whether to merge only the financial segments of IL&FS and its subsidiary Investsmart with Tata Finance or the entire company. In fact, IL&FS had already been toying with the idea of spinning off some of its financial services units to UTI before the July debacle scuttled the plans. According to a wag, the discussions are still at such a preliminary stage that both sides may be in denial mode, so it remains to be seen if the courting actually culminates in a marriage or just breaks off.

The JET order

While on Tata Finance (TFL), the group would do well to send all its senior executives, especially the chairmen of its various subsidiaries and group companies for an intensive course on corporate governance and what constitutes insider trading. The answers by J E Talaulicar, the former chairman of Tata Finance’s subsidiary Nishkalp, to its internal committee on Insider Trading has some astonishing practices and answers. For instance, when Talaulicar decides to sell one lakh shares of Tata Finance, he does not go to a broker but to TFL’s managing director Dilip Pendse. Pendse too does not assign the task to a junior. He personally liaises with the broker and gets Talaulicar twice the market price through a back dated transaction. He also arranges to pay the broker Rs 70 lakh through Nishkalp. Does this mean that the funds of TFL and Nishkalp were being freely used like petty cash with no questions asked? Talaulicar also told the committee that he was ‘more interested in the aggregate value that the share would fetch rather than the per share price of the shares’. This naive confession suggests that as long as he was handed over a hefty lumpsum by Pendse he asked no questions. This was the same person who was sent a daily Net Asset Value (NAV) of Nishkalp as the stock price plummeted. The falling NAV apparently did not cause any ‘alarm or concern’. The clear lesson is that even a non-executive chairman of a finance company better understand the basics of stock market operation.

Market shenanigans and liquidity

It is a confusing time for investors. Should they trust the current rally and jump in to trade or should they be wary because it is the Ketan Parekh (KP) stocks, which are sizzling again. What is worse, neither the stock exchanges nor the market regulator are making any push to investigate the curious price movements. Hence, prudent investors are staying on the sidelines and the risk-takers are falling for the spiel of analysts and fund managers who are busy talking up the market. What the rally had done is to silence all those brokers who have been waxing eloquent on the absence of liquidity in the market because of rolling settlements. The SEBI chairman, who has gone public with the fact that he was against rolling settlements, may also like to note that not only has turnover increased despite rolling settlements but futures and options trades are also catching on in a big way. What is important though is for the bourses to investigate speculative excesses—they can no longer hide behind the excuse that inter exchange arbitrage hampers investigation.

Tailpiece: As if the Bombay Stock Exchange did not have enough problems, it has landed up with some more. Apparently, the Central Bureau of Investigation (CBI’s) site was hacked out of the BSE premises and the agency as well as the cyber crime police are visiting the exchange everyday to track the hacker. Of course, the cyber crime department acts with alacrity and purposefulness only if they are personally affected, or if the other side is not a powerfully connected media house — but until they trace the culprit or abandon the investigation, the BSE is on tenterhook.