July 31, 2000

What Federation?

A couple of weeks ago, Kirit Somaiya, the BJP MP from Mumbai, marched to Delhi leading, what he claimed, was a Federation of Investors’ Associations. The delegation comprising Somaiya’s Investor Grievances Forum and two others met the Finance Minister, the former Law Minister as well as senior bureaucrats in the two ministries, and submitted a Memorandum on Protection of Small Investors. It now appears that both investor representatives who accompanied him were taken by surprise at Somiaya’s claim about the Federation and the Memorandum prepared by him. They only continued with the meetings because it gave them an opportunity to discuss investor issues with the ministers. Virendra Jain of the Midas Touch Investors’ Association later decided to clarify the position and expose Somiaya’s mischief. He wrote to EAS Sharma, Secretary, Economic Affairs explaining the situation and distancing himself from the Memorandum; he also asked that the Finance Minister be told the truth. Somiaya still has to understand that credibility is key to being a crusader, particularly if he hopes to win the confidence of activists, or investors who have already been cheated.

Cause and effect

Last Thursday’s headlines announced that the IDBI’s net profit had declined a hefty 23 per cent in the June 2000 quarter. On the very same day, newspapers also reported IDBI’s sanction of Rs 345 crores to Essar’s already-delayed oil refinery at Jamnagar. IDBI was in fact, the last institution to clear the Essar loan — the insurance companies, ICICI (Rs 504 crores) and the even more beleaguered IFCI (Rs 50 crores) which is itself seeking a Rs 400 crores from the national exchequer, had cleared the lending even earlier. The total exposure of lenders to the refinery complex is now a huge Rs 6100 crores. Ironically, a condition to the lending institutions is that Essar should meet some of the dues of other group companies. In fact, many Essar companies have overdues of interest and principal, the biggest being Essar Steel. Apart from loans, the institutions have also issued performance guarantees and export guarantees towards loans from foreign banks such as ING Baring, Bank of New York and Societe General. Essar has been defaulting on these too. It would be interesting to see which group company is in a position to repay the institutions.

Bowing to the RBI

A crack down by the RBI on private banks aiding speculation by guaranteeing brokers’ margin payments has worked. At least HDFC Bank and Global Trust Bank are not offering any new guarantees. Also the brokers who already enjoy this benefit are being asked to raise deposit from the 10 per cent cash accepted earlier to 35 per cent, as soon as these come up for renewal. This is interesting, because these very banks continue to ask investors to maintain fairly hefty minimum balances for opening Depository accounts even though SEBI has said this is wrong. Is this an indication of which regulator is tougher?

IL&FS’s super-glitzy HO

Infrastructure Leasing & Financial Services’ (IL&FS) glitzy head-quarters at Bandra-Kurla, the spanking new business district taking shape at North Mumbai, has beaten ICICI in ostentation. When ICICI’s building was completed, a shocked corporate sector used to call it a 7-star office. Now there is IL&FS. We learn the smart building has not-so-smart maintenance issues. Keeping the dust off the glass atrium is apparenty a nightmare and cooling it requires such heavy duty air-conditioning that the electricity bill is soaring to eight digits. Also, like ICICI, it has several thousand square feet of excess space which it need to sell/lease in a hurry. Fortunately for IL&FS, it only has 20-odd shareholders, who are easy to convince about the need for super glitzy work places.

Updated weekly.

The author's e-mail address is: suchetadalal@yahoo.com

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