When an auto enthusiast watches a television advertisement, it is the car that grabs his attention, rather than Bollywood stars Ajay Devgan and Kajol. Veeresh Malik was startled to notice that Tata Indicom’s Chal Chala Chal advertisement features a Maruti-800 along with the Devgan couple, rather than the Tata brand Indica. ‘‘What is wrong with the Indica? And who is the ad agency in this case’’? he asked. The goof-up, we understand, hadn’t been noticed until we brought it to Tata Indicom’s attention. There are clearly a lot of red faces at the Tatas and McCaan Erickson, which produced the advertisement. ‘‘The matter has been taken up at the corporate level,’’ we are told. It must. After all, the gaffe itself is no big deal, but a business group that charges a ‘‘brand equity’’ fee for use of the Tata name must surely ensure that it cross-promotes brands within its own corporate stable. Since Tata Indicom also had a strange Japanese theme, Maruti Suzuki must be grinning from ear-to-ear.
Stock exchanges routinely ask companies to verify the accuracy of media reports in order to safeguard investor interest. This is invariably a mechanical exercise that rarely clarifies tricky cases since there is no independent verification of facts. Last week was a good example of this ineffectual exercise. The two national bourses wrote to Reliance Capital to clarify a report that the Anil Ambani Group had pitched for a strategic investment in the BSE during its corporatisation effort. Both exchanges mechanically put out Reliance Capital’s denial claiming that the report was ‘‘factually incorrect and speculative in nature’’. The company said, ‘‘Reliance Capital Limited has not had any meeting with the Board of the Stock Exchange, Mumbai’’ regarding participation in the Corporatisation of the Exchange, ‘‘nor has any presentation or proposal been made in this regard by the company’’.
As this column reported last week, Anil Ambani’s aides had indeed met the BSE CEO (not its board of directors) with an investment proposal. If the bourses were serious about safeguarding investor interest, why did they not clarify this to the public? Instead, the BSE issued advertisements with vague references to ‘‘inaccurate’’ and ‘‘highly speculative’’ reports, but making the point that the BSE has yet to ‘‘finalise its strategy and road map for disinvestment’’. Since the two bourses communicate and collaborate on several regulatory issues, the NSE too could have put out an independent statement instead of a mechanical response. If bourses themselves are confused about how to deal with media reports, how can they expect accuracy or clarity from thousands of listed companies? SEBI and the bourses need to examine whether such clarifications hurt, rather than safeguard, investor interest.
Confusion, speculation and rumours about life after corporatisation are not restricted to the BSE. Several dubious brokers continue to lobby hard to acquire a fat stake in the Delhi Stock Exchange (DSE), which can be profitably resold to a potential acquirer. Here too, the corporatisation is not finalised. The Calcutta Stock Exchange, which is in the doghouse because of its inability to stop the manipulation of penny stocks, has apparently claimed that it has been permitted to raise its capital base. On the contrary, the Securities and Exchange Board of India (Sebi) is furious to discover a new set of nine small-cap companies whose shares were clearly ramped up, soon after the regulator cracked down on 11 other companies. In another development, the management of a tiny and defunct bourse has let out its property on a 99-year lease in order to cash-in on the assets before demutualization. Clearly, the market watchdog will have its work cut out to ensure a smooth transition into corporatisation.
On one hand, Sebi believes that India has evolved good capital market regulation and risk management systems, tailored to meet our specific systems and needs. So much so that India will play host to the International Organisation of Securities Commission’s (IOSCO) annual conference in the coming year, SEBI hopes for a larger leadership role in IOSCO’s body. But when it comes to training and technical assistance, SEBI as well as the Finance Ministry feel obliged to turn to the USAID. A global investment bank has recently received a ‘‘request for a proposal’’ from the USAID to train SEBI and Finance Ministry officials in the following areas: Strengthening the market surveillance system; Increasing the effectiveness of SEBI’s investigation and enforcement program; Development of SEBI’s human resources; Development of a collaborative regulatory and institutional framework for market oversight and broadening retail investor participation. This is a two-year programme that will cost $2.5 million. USAID wants the Resident Team Leader to be an Indian who will identify and work with a group of local experts. Interestingly, USAID is scouting for leaders among top US investment banks, with just about a decade of experience, not necessarily in a regulatory capacity. It is probably safe to bet that the big attraction of foreign training programme will be the USAID funded study tours to the US.