Is the Forbes Gokak counter-bid a charade? (18 November 2001)
When Pawan Kumar Sanwarmal shot into the limelight with his audacious counter-bid for Forbes Gokak, the investment community asked: who is Pawan Kumar? It now turns out that he is rather well known to some key Tata directors.
Most intriguingly, he is fairly close to Tata Finance’s former chairman Fredie Mehta and his fund manager son, Kayu Mehta. Pawan Kumar admits to the friendship but says that they do not do business together. Does he have other connections? It would seem so. His counter bid for Forbes Gokak is through three companies—Resham Resa, Man-Made Fibres and Dalal Street Investments.
Now, Dalal Street Investments had once borrowed Rs 5 crore from Tata Finance’s controversial subsidiary Nishkalp, whose investments have called into question the vaunted corporate governance standards of the whole Tata group. What is even stranger is that the borrowing was backed by the pledge of two lakh shares of Forbes Gokak and six lakh shares of Tata Investment Corporation. Any large investor would tell you these shares are not freely available and traded in such large numbers. Pawan Kumar however tells us that his companies have large holdings of quality scrips, including the Birla investment company Pilani Investments, so his holding of the Tata scrips should not surprise anyone. Maybe Mr Ratan Tata would like to know more about that Nishkalp borrowing.
The spot deal
For instance, almost all the Tata Investment Corporation shares pledged by Sanwarmal’s company with Nishkalp suddenly sold in an off-market spot deal to a company called to Aftab Investments and that too at Rs 8 above the ruling market price. We learn that the deal was sealed at Rs 68 when the ruling market price was Rs 60. Who owns Aftab Investments? Well, it is another Tata company—an investment subsidiary of Tata Power! Does the spot deal above market prices not suggest an unusual closeness between some Tata directors and Sanwarmal? Pawan Kumar claims that he merely runs a large investment group with a knack for picking up good stock. But the Tatas would do well to find out if there was more to the deal and its price.
Who is Pawankumar Sanwarmal?
Coming back to the original question, Pawan Kumar is the son of Sanwarmal Sedmal who used to own a company called Dil Vikas Finance. Readers would recall that Dil Vikas was sold to the late Bimal Gandhi who ended his life in a tragic suicide recently. Dil Vikas and Tata Finance, as it happens, were both separately involved in the infamous 1998 bailout of brokers when Harshad Mehta’s comeback attempt went kaput. The brokers who fronted for Mehta were bailed out under the auspices of the Bombay Stock Exchange.
Pawan Kumar himself has little stock market experience. Sources say that he used to run a packaging company that made sachets for milk. Curiously, Pawan Kumar along with Bank of America was among those lucky investors, who were allotted shares of DSQ software at Rs 275 a share in a preferential offer at the height of the IT stock bubble. The DSQ Software shares had later soared to as high at Rs 2,820. There are two curious coincidences. One, it was Fredie Mehta’s son, Kayu Mehta spearheaded the DSQ deal for Bank Am and two, DSQ software was among the four scrips, which had caused the downfall of Tata Finance’s subsidiary Nishkalp. Nishkalp had bought over a lakh of DSQ shares at prices as high at Rs 2,000. Was it giving an exit to people close to the group?
After the embarrassing debacle at Tata Finance, Ratan Tata and his group need to ask some searching questions about the moves and motivations of several top people in the group. Addressing a press conference recently, Ishaat Hussain, the new Chairman of Tata Finance had said about the company that: “Laws were not broken. They were raped”. Well, the Tatas better make sure that the raping does not happen again. For instance, sources connected with Dil Vikas tell us that someone close to the Tata Group was instrumental in hatching a scheme to buy up big chunks of asset rich Tata Companies. He says that Dil Vikas as well as Dalal Street Investments had picked up shares of Tata Investment Corporation, Forbes Gokak and Rallis. This person also owed a large chunk of money to Bimal Gandhi and may have added to his financial tension. Is there such a person behind the plan? Why was Tata Power’s subsidiary buying shares on a cash basis from Dalal Street Investments? How many Tata directors are close to the so-called corporate raider? And is the open offer and counter-offer really a hostile attempt or is it all a part of an elaborate game?