Rapid developments

Meanwhile, there have been several new developments regarding the ongoing investigation into Stock Holding Corporation of India (SHCIL) and its former subsidiary SHCIL Services Ltd (SSL). The Company Law Board (CLB) heard the petition filed by SHCIL about the “fraudulent” dilution of its shareholding that we reported last week. Strangely enough, the matter has been posted for its next hearing in September without any interim relief. A rattled SHCIL board, comprising nominees of top banks and institutions such as IDBI, ICICI, IFCI, LIC, GIC and UTI, met in Mumbai on Saturday to chalk out the next course of action. We learn that the board was planning to seek police protection after SHCIL’s former chairman and managing director R Jayaraman Iyer (who was sent on compulsory leave on April 15) made two sudden and disruptive visits to the SHCIL office last week. Institutional source says that SHCIL is likely to call an Extraordinary General Meeting (EGM) to ratify some major corporate changes. This could include replacement of a couple of SHCIL directors, including a former bank chairman who has been sending out angry letters in defence of Iyer and S Ramanathan, CEO of SSL, whose activities are under investigation.

SSL vs SHCIL

The new team at SHCIL is discovering to its horror the extent to which it has been paying for SSL’s staff, resources, infrastructure and business development while SSL has quietly obtained permission from the Securities and Exchange Board of India (Sebi) to get into businesses that directly compete with it. Over the last six months, SSL has been registered as a broker (with the Bombay Stock Exchange), as a Portfolio Management Services advisor and a Depository Participant (DP). The last mentioned puts it in direct competition with SHCIL, which is the largest DP and custodian services company in the country with all large public sector institutions and banks as its clients. As reported earlier, SHCIL’s shareholding in SSL has been “fraudulently” diluted to 24 per cent and the matter is now before the CLB. Intriguingly, neither Sebi nor the BSE and the CDSL have made any attempt to conduct even a cursory inspection of SSL’s activities, although it is registered and regulated by them for multiple businesses. Market participants say that the SSL shareholding, including its big foreign ownership, is still not in the public domain, while Indian brokerage firms face serious interrogation by both exchanges for even tiny changes in their own shareholding. The BSE refuses to respond to queries on this issue.