Probe into promoters' role in KP scam sought

Probe into promoters' role in KP scam sought
ENS ECONOMIC BUREAU

MUMBAI, APR 3: In a scathing attack on the regulators, company promoters and India's largest mutual fund Unit Trust of India (UTI), Kirit Somaiya, BJP Member of Parliament and President of Investor Grievances Forum (IGF) has demanded drastic restructuring in the financial sector, especially the UTI and the promoters role in rigging.

"Every time the government launches a probe into the market manipulation, it meets a dead end after stumbling on an operators role. They should get deep into the issue and expose the promoter-broker nexus in rigging the market according to their whims and fancies," he said. ``It is strange no one has bothered to look at the promoters role in the entire scam who have passed crucial inside information to stock brokers to hoodwink investors,'' Somaiya said.

``In fact, UTI attempt to hide its huge exposure to K-10 stocks particularly Zee TV and its unlisted subsidiary City Cable, HFCL, DSQ, Century Finance (broker) and Cyberspace, unlisted company Numero Uno and Aftek Infosys should be investigated thoroughly,'' said Somaiya, adding, "it's time UTI officials keep a distance from company promoters and brokers.'

Elaborating, Somaiya said Ketan Parekh's favourites like Aftek Infosys have crashed from its peak of Rs 5,000 in the year 2000 to Rs 154 as on March 14, 2001. Similarly, HFCL has dipped from Rs 2,553 to Rs 194, Zee Tele plunged from Rs 2,330 to Rs 127, Silverline from Rs 1,395 to Rs 85, Pentamedia from Rs 2,344 to Rs 96, SSI from Rs 7,200 to Rs 641 and DSQ from Rs 2820 to Rs 127.

According to unconfirmed estimates, he said, UTI had subscribed to the private placement of Century Finance at Rs 500 per share and also invested in DSQ Software shares, which he suspects to have been pumped back into the market. He also questioned UTI decision to subscribe upto Rs 50 crore of HFCL's non-convertable debentures (NCD) just a day before the market crashed on March 2.

"UTI has invested heavily in equities of over 1,426 private companies, out which only 81 companies show an appreciation and the remaining 1,345 companies are not traceable or tradeable on the bourses. No wonder UTI's total asset under control has crashed to Rs 64,250 crore as on February 28, 2001 from Rs 73,600 crore on March 31, 2000," he said.

Somaiya has urged the government to separate the asset management company (AMC) into a separate entity and keep UTI chairman away from the investment decisions taken by the AMC. The recent meltdown of ICE scrips is going to turn as another US-64 for UTI. "Nowhere in the world a single man is allowed to make investment decision for such a MF behemoth. The trust is slowly but surely turning up a treasure chest for manipulators," Somaiya said, adding common man has to see dwindling returns as evident in the Rajlakshmi termination case.

"Why the government is dithering on the implementation of Deepak Parekh report on UTI's restructuring,'' he said, adding, "The NAV of US-64 is still a mystry even after an assurance from the finance minister himself." On the UTI Bank and Global Trust Bank merger, he said that the revaluation on the merger ratio is a `big joke'. "The second valuation is just an eyewash. They had provided the same facts and figures for the second valuation and feel proud that the second valuer too has arrived at the same swap ratio of the first valuer. With the present market price of both UTI Bank and GTB at their 52 week low, the sensible thing to be done now is to go in for a third valuation," he said. IGF has also threatened to move the court if a third valuation is not done.

K-10 shares were a hit with UTI too
NEW DELHI: The nexus between Unit Trust of India and Ketan Parekh is quite apparent if one has to look at UTI's exposure to K-10 shares. The Trust'sexposure in scrips of seven high profile new economy companies including Himachal Futuristic, Global Telesystems, Satyam Computers and Zee Telefilms stood at around Rs 1,800 crore as on February 28 this year.

The finance ministry has reportedly asked the market regulator Sebi to enquire whether UTI had indulged in insider trading, if any, in collusion with Parekh. Data from UTI shows that the value of UTI's investments in HFCL, Global Tele, Satyam and Zee alone stood at over Rs 1,600 crore while the balance amount of less than Rs 200 crore was in DSQ Software, Pentamedia and SSI (Software Solutions).

UTI's holding in Himachal Futuristic Communication Ltd (HFCL), was over 11 per cent of the company's equity capital base of Rs 78.82 crore. These investments were made through various mutual fund schemes including Monthly Income Plans (MIP) and US-64.

The market value of UTI's investment in HFCL as on February 28, 2001 stood at around Rs 617 crore, when the stock was trading around 670. The current market price of HFCL share is around Rs 136.

Similarly, UTI's exposure, through all its schemes put together, in GlobalTelesystems stood at around 7.8 per cent of the company's equity base as onFebruary 28, with aggregate value of investments standing at Rs 138 crore onthe market price of Rs 404 per share. The current market price is around Rs154.

In Zee, UTI held over three per cent stake in the company's equity of around Rs 42 crore. The market value of its investments in Zee as on February 28 stood around Rs 215 crore when the market price was Rs 171against the current price of Rs 130.

The aggregate value of UTI's investments in these seven companies stood at Rs 3,200 crore as on January 31 and came down drastically to Rs 1,800crore on February 28. Assuming that UTI has not liquidated largenumber of shares in these companies during March, the current market valueof its corpus would be around Rs 1,100 crore.

UTI held merely around 1.7 per cent of SSI Ltd's (Software Solutions) equity but the market value, on the price of Rs 1,272 as on February 28, of the stake stood around Rs 140 crore. SSI's share price has almost halved to Rs 643 since then.