M.Damodaran, the outgoing Chairman of the Securities & Exchange Board of India (Sebi) kicked off a debate in his final interview by raising questions about the ethics of television anchors talking up or down stock prices. He referred to them as 'anchor-investors' and suggested that their comments are motivated. In that interview (with Shekhar Gupta in Walk The Talk) Damodaran refers to a letter written by an aggrieved investor to the anchor of a widely viewed business channel (with a copy marked to the SEBI chairman and us, among others). Damodaran said that he found merit in the investor’s charge that the channel did not criticise the Reliance Power issue while it was open for subscription and found everything wrong with it once it was listed. Let us look at what the investor, Rakesh Mundra, said.
Dear Mr X
I have been listening to your coverage of the Reliance Power IPO since it was launched on CNBC TV- 18. It is a sorry state of affairs that pre IPO, there were hardly any negative remarks by you or any of the analysts, while suddenly post issue/listing all of them turned negative including you and your colleagues. On the contrary, when the issue got huge response on the first hour/day you were all praising ADAG (Anil Dhirubhai Ambani Group).
Why don’t you organise a debate among analysts and merchant bankers who have justified the premium for a meaningful analysis of the issue pricing? Prima facie almost all the investors are well aware that NTPC is a much better bet; if so, why did the merchant bankers and regulator (though legally regulator may not have a say but they can always prevail) approve a price of Rs450.
The merchant bankers are answerable to the whole country. As you are aware, almost five million people have applied to the issue, which is a sizeable population; if you add their dependents it is in excess of 20 million, i.e., 2% of the urban population.
What you are doing as of now is only asking analysts to give their point of view on the issue price. All are negative for obvious reasons. This is resulting in more selling pressure; consequently the price is going down and harming the general public.
The QIB portion to RPL was subscribed over 82 times and 446 QIBs had put in bids. They have allotment of over 15 crore shares (60% of issue), you should find out who are these QIBs; and why have they subscribed at this price?
As I understand, before investing, all QIBs have to complete in-house due-diligence and it goes through many channels before getting a final nod. How did they suddenly turn sellers on the first day of listing, that too below the issue price?
In fact, in my opinion,it is a case for thorough investigation by the regulator and other agencies and if it comes out that the issue was overpriced or hype was created, the company should be asked to refund the money to all investors or at least they must refund the excess premium charged. This is nothing but a daylight robbery. Is Mr Anil Ambani not accessible? I do expect a reply from you.
(The letter has been partly edited for grammar and syntax).
Happily for Mundra, Anil Ambani issued a statement demanding a SEBI investigation into the “vicious and orchestrated campaign of market manipulation and market abuse”. Although he named nobody, the target was clearly the Mukesh Ambani group. What did Damodaran do about the letter or about anchor-investors? Nothing. Media insiders know that the power of the advertising buck effectively blocks objective coverage, especially by those who have the most to gain. Concepts like private treaties (which are quickly being adopted by more media houses) are also killing the distinction between news and advertising. In fact, leading business channels demand hefty fees to cover seminars or events that are broadcast as editorial coverage with no indication that it is a sponsored programme.
Read more on the issue in the latest issue of MoneyLIFE Magazine -- soon on the stands. Email: [email protected]