There are major changes afoot at Reliance Infocomm and they are not restricted to Kamal P.Nanavati being appointed as head of Reliance India mobile and Manoj Modi getting charge of the wireline business. Mukesh Ambani, who nurtured the project, is spending less time with the Infocomm business and more with his petroleum operation.
That is not necessarily because the company is now running on its own steam, but because meeting consumer demands has turned out to be tougher than Reliance anticipated. Informed sources say Reliance Infocomm is planning to bring in a ‘strategic partner’ with experience in the telecom business and could part with a 25 to 40 per cent stake of the company. Two top investment banks have apparently been mandated to identify a suitable partner.
This move may rule out the company’s plan to place 10 per cent of its equity with foreign investors and raise Rs 5,000 crore and several debt raising proposals announced recently. However, it may still go ahead with the IPO that is also part of its fund raising agenda.
The Securities and Exchange Board of India (Sebi) recently told the Financial Express that it has imposed Rs 20 crore of penalties against capital market intermediaries after the amended Sebi Act enhanced its powers. The Rs 2.89 crore fine against Alliance Mutual Fund’s asset management company in the Samir Arora matter was one such example. Similarly, hefty fines are understood to have been imposed on an international bank and against several mutual funds. The question is, why are these penalties rarely reported or announced through a press release? Because, Sebi in its wisdom has chosen to coddle wrong doers by refusing to cause damage to their reputation by publicising adjudication orders and fines. Yet, Sebi is well aware that public exposure is an integral part of the regulator’s arsenal; it acts as an effective deterrent and helps warn investors about the intermediary’s track record. Now that questions are being asked, Sebi has promised corrective action. However, it is not enough for Sebi to report penalties prospectively; it must upload all adjudication orders issued over the last year under its new powers.
Now that the Minister of State for Company Affairs Prem Chand Gupta has declared a war against vanishing companies and promised stringent action against dubious companies, he must take a look at those companies that have the highest number of investor complaints lodged against them. The NSE and the BSE both put out lists of such companies periodically. Last week, both lists showed that Vatsa Corporation continued to remain at the top of this dubious chart that it has headed for years. At 1,188 complaints against it (cumulative) on the BSE alone, Vatsa has at least twice the number of complaints as its nearest competition. Keeping it company on the list is another group company called Vatsa Music. Since the Minister said the Department of Company Affairs would work in close cooperation with the Sebi, it should surely initiate action based on this list. Incidentally the BSE has resolved 1,244 complaints against companies in June alone.
Essar Oil with over 545 complaints against it is second on the list of highest complaints. But in this case there is a catch. The massive uptrend in commodity prices last year has dramatically changed the fortune of the Ruia group, but the BSE press release says, ‘‘Essar Oil Ltd has filed four company petitions in the High Court of Gujarat at Ahmedabad and got an ex-parte common interim order dated July 7, 2003. As per the said order, an interim relief was granted whereby all proceedings, complaints, etc pending before various authorities including the Stock Exchange, were stayed.’’ Consequently, the company continues to be traded on the bourses, but no action can be taken against it. Not unless the government moves forcefully to have these orders vacated. Public sector companies ONGC, GAIL, Power Trading Corporation, Indian Overseas Bank and Bank of Maharashtra figure prominently on the list because of problems with their IPO allotments. Most others are near defunct companies such as PAL Peugeot, Enkay Texofoods, Patheja Forgings, Sabero Organics etc, which have been suspended from trading and may vanish unless regulators make efforts to protect investor interest. This list is separate from the 552 companies that were recently purged by the BSE from its list of traded stocks.
Ashok Leyland’s auditors PriceWaterhouseCoopers are not the only ones planning to exit the company. Informed insiders say a senior director, P.K. Choksey is also retiring from the board. Sources close to the company were, however, told that Choksey was pulling out of several boards in order to reduce his work commitments. Accounting companies and analysts continue to watch developments with great interest.