October 23, 2000

Plummeting credibility
Stock market regulator SEBI has found its credibility plummeting so sharply in one short fortnight that it probably feels lucky it is not a listed company. Here why: When SEBI made its appearance before the Parliament Standing Committee, mandarins of the Finance Ministry took the unusual decision of accompanying it. Because, on several issues the ministry disagreed with SEBI, particularly on its demand for more regulatory powers. The SEBI chairman’s attempt to dramatise his plea by threatening a Public Interest Litigation was an amazing mistake. It is probably the first time that an official regulator has said anything so ill-considered — particularly when its slow and inconsistent disciplinary actions have often drawn criticism. He faced the discomfiture of having his demands summarily shot down. SEBI’s flip-flop on the rolling settlement issue brought it more embarrassment including scathing editorials from normally sympathetic papers. The decision looked particularly questionable because the stock exchanges that did indeed want the postponement of rolling settlements had been clever enough to be muted about their desire. There was no whining about software not being ready nor were there complaints about trading volumes shrinking. As a result, SEBI’s last minute postponement makes it appear fickle and out of sync with market needs. After all, it does not need more powers to assess market readiness for introducing new systems and set appropriate deadlines. The final blow was the hostile takeover bid by Arun Bajoria on Bombay Dyeing. Predictably SEBI’s much worked upon Takeover Code was found wanting and full of loopholes. It was caught napping with regard to follow up action on Bajoria’s notification of his five per cent acquisition of Bombay Dyeing shares and had failed to watch his future acquisitions even until he touched the 15 per cent trigger for the open-offer to the public. An important result of the bashing that it received is that the chairman and a senior executive director (ED) have cancelled several of the proposed foreign visits. In fact, the ED, is understood to have single-handedly run up a seven digit multiple of expenditure on his trips. This is well above his salary and is causing a lot of heartburn. Those in the private sector may find this inconsequential, but everybody in government knows that a foreign junket is a highly prized perk. In fact, the perverse decision with regarding to taxing desi venture capital firms is supposed to have swung on the basis considerations such as who was allowed to go abroad to study foreign venture capital rules.

Some pending issues
In order to help SEBI avoid embarrassment when it argues for more powers at future parliamentary committee hearings, here is a short list of some regulatory decisions which are pending for a long time. Firstly, the regulator seems to have forgotten about the June 1998 payment crises and cover up by the BSE. It has yet to act against Harshad Mehta, the main architect behind the massive price manipulation those days, as also then BSE vice-president Rajendra Bhantia and the companies which connived with the broker — BPL, Videocon and Sterlite. Then there is the Herbertson case where also a decision is pending for over two years about whether Kishore Chabbria and Vijay Mallya had both violated the takeover code and also whether Chhabria ought to make an open offer. It is also sitting on a decision with regard to Jain Studios v/s the Ambanis and whether it requires an open offer. Finally, several price rigging investigations have quietly gone into limbo.

Parekh of Parekh Marg
The way things are going, it may not be long before the more famous Parekh on HT Parekh Marg, is a Ketan and not a Deepak. The Backbay Reclamation Road in Mumbai was recently renamed after the renowned HDFC chairman because both, HDFC and ICICI, the two institutions which he has been associated with were headquartered on it. The ICICI building has since been sold to stock broker and venture capitalist Ketan Parekh who could well choose to rename it Parekh Towers. One wag speculates that letters addressed to him would then read — Ketan Parekh, at Parekh Towers on Parekh Marg. Hacks with no institutional memory cannot then be blamed for associating the road with the new Parekh on the block.

Updated weekly.

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

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