Tamil Nadu-based G.V. Films, whose rights offer to raise Rs 40 crore by offering its investors seven shares for every 10 held at Re 1, is probably a great example of how this Bull Run is losing all sense of proportion and reason. Everything that is wrong with the company is boldly stated in the prospectus. For instance, after the death of its promoter G. Venkateshwaran in 2003, the company was in such disarray that somebody apparently vanished with Rs 68.60 lakh. Until a High Court and Company Law Board ordered Annual General Meeting in February 2004, it had no board of directors and apparently no management worth speaking of. It owes Rs 31 lakh to the Income Tax and Rs 12 lakh to the Sales Tax department. Moreover, group companies (Kaashyap Radiant Systems Ltd and Ramkashyap Investment Ltd) continue to be in disarray, have either held no general body meetings or are listed as defaulters by the Reserve Bank of India. One of its five directors, A. Venkatramani is a chairman of Kaashyap Radiant and his family still seems to be the largest shareholder of G.V. Films (the company has 47 court cases pending against it). Further, the Central Bank of India has sold all the properties offered by the late G. Venkateshwaran as collateral, but its account is still not settled. It also has a dozen civil and criminal cases filed against it. If that wasn’t bad enough, the share was trading at around 30 to 40 paise (face value is Re 1) until March this year, after which it has shot up to a princely Rs 1.33 in time for its issue. Obviously, the big question is, what investor would want to give G.V. Films a whopping Rs 40 crore to renovate multiplexes (Rs 24 crore), set up a portal at an enormous cost of Rs two crore and make more movies? Especially since the main promoters have sold 1.12 crore shares on the bourses in the last six months?
The answer to G.V. Films’ confidence probably lies in its new investors. In 2004, it amalgamated with One World Media Network Infotainment and soon after a bunch of big investment and brokerage firms acquired a substantial stake in the company. These include IndiaBulls Securities, which is now dabbling in real estate and making repeated issues overseas, Fortis Securities Ltd, Shivalim Securities Ltd and Gumti Securities Ltd. Will these big investors have the clout to persuade the 68 per cent public shareholders of G.V. Films to subscribe to the rights offer? Or do they hope that the rising share price on the bourses will be the bait? Or is it the announcement that it hopes to list the shares on the National Stock Exchange? Whatever the answer, it’s clear that corporate India and its investment bankers are confident that we are in the middle of another stock bubble, where even companies such as G.V. Films can pick up Rs 40 crore from the market with an 85 page Offer Document that has more negative disclosures than positive ones.
India’s financial capital is groaning under its infrastructure constraints, but one can hardly find a voice in the legislative assembly to raise these concerns. The Mithi river was eaten up by reclamation and encroachment, but despite several results, hardly any politician raised a voice, until the swollen river hit back and drowned a large number. But take a look at what happens when a corporate entity wants concessions. Sterlite Optical Technologies has been asked by the Gas Authority of India Ltd (GAIL) to pay liquidated damages for delayed delivery of equipment way back in December 2000. Yet, for the last five years, politicians of various regions and parties have been writing to the company, sometimes through the Petroleum Ministry, forwarding representations from the company for a waiver of these damages. Those pleading the company’s case include Sahib Singh Varma (11-12-2002, then Labour Minister) and more recently Jitin Prasada and E. Ponnuswamy (22-02-2005). If only our MPs showed a fraction of the diligence in following up issues of actual concern for the people.
Prem Gupta, the Minister for Company Affairs, was a Member of the Joint Parliamentary Committee (JPC) of 2000, which recommended that funds collected under the Investor Education and Protection Fund (IEPF) should be handed over to the Securities and Exchange Board of India (SEBI). This is a fat kitty of over Rs 350 crore, although very little is available for actual spending. The MCA was clearly unhappy at the decision and Gupta himself had changed his mind. After a quiet tussle for control over the IEPF funds, the July 2005 Action Taken Report (ATR) of the Finance Ministry blandly says that MCA was of the view that IEPF money was “appropriately administered by MCA”. Accordingly “a MCA Committee, after duly examining the proposal for transfer of IEPF to SEBI did not approve the proposal. Action completed”. Can internal committees of individual Ministries reject a JPC recommendation? How many JPC recommendations have been similarly rejected? We will probably never know, because neither parliament nor JPC members seem interested in the scam investigation anymore.