DSQ Software manages AGM nod for unapproved loans

DSQ Software manages AGM nod for unapproved loans
ENS ECONOMIC BUREAU

MUMBAI, MAR 30: When it comes to taking questionable decisions, Indian companies are in the forefront of others. Companies have even gone to the extent of giving loans to its associates without the approval of shareholders and get it ratified later, ignoring corporate governance practices. DSQ Software has taken post-facto approval for loans of Rs 287 crore -- out of which Rs 100 crore was interest-free loans -- made in the past at the annual general meeting held in Chennai recently.

DSQ Software had granted short-term loans/advances of Rs 287 crore during the last accounting period ended December 2000. It gave these loans to groupcompanies (Rs 79 crore) and stock broker/security firms (Rs 208 crore). All these loans and advances have been recovered. Since the company had not takenapproval of shareholders as required by the Companies Act before giving these loans, it moved a special resolution at its annual general bodymeeting (AGM) held in Chennai on March 29, 2001 to give post-facto approval to these transactions.

Speaking after the AGM, Dinesh Dalmia, vice chairman and managing director,clarified, "We had granted these short-term loans during January and February2000. Of the total amount of the loan, we have received most of it and as on December 2000. The outstanding amount is to the tune of Rs 3 crore. This balance amount of Rs 3 crore was also settled after December 2000. The loan we have given is short term in nature. Since it is in excess of the limits under Sec 372A of the Companies Act, we are moving an enabling resolution. Wepropose to ratify the status, as per the statutory requirement, at the AGM."

On the question of giving more loans to body corporates in the near future, he said, "We will not be giving any loans to body corporates and firms for the present." About the interest income the company had received for theshort-term loans amounting to Rs 287 crore, he said, "The loans we have giveninclude some interest-free loans (over Rs 100 crore) also. On loans bearing an interest, we have received Rs 9.62 crore and they are accounted for in the books as of December 2000."

The company has been making a lot of noice about its plans for acquisitionsabroad. But nothing much has happened. On the question about what went wrong in acquisitions as intended by the company, Dalmia said, " The valuation haschanged and we have taken a second view on this. During the process ofacquisition, we shortlisted three or four American companies. But the valuation was affected due to a slowdown and changes in technology."

The share price of DSQ had come down from Rs 334 to Rs 110 in the last one month following the heavy hammering in infotech shares. It may be noted thatout of Rs 287 crore loans, Rs 79 crore had gone to the associate companies, Rs 84 crore to three broking firms with Calcutta Stock Exchange trading cards and Rs 124 crore to three more firms, one of which is a broking outfit.

The loan to three broking firms with trading operations on the Calcutta Stock Exchange has raised eyebrows as DSQ Software counter was one of the worst hit during the recent stock market meltdown. The special resolution ratifying the loans especially to the three broking firms was "unusual", according to broking circles. In fact, one of the defaulting CSE brokers, Harish Chandra Biyani, along with his firm Biyani Securities Ltd had received 10.5 lakh odd DSQ Sotfware shares in his account.