SHCIL tries to regain control of its subsidiary and CBI asks questions, but the market regulator continues to remain a silent spectator, says Sucheta Dalal
Having allowed its wholly-owned subsidiary SHCIL Services Ltd (SSL) to pass out of its hold to a bunch of private and foreign entities and individuals, the Stock Holding Corporation of India Ltd (SHCIL) made some decisive moves to regain control around mid-June.
A board meeting of SSL on 23rd June saw sweeping changes in its board composition with the installation of six new directors including three institutional nominees. The once powerful CEO, S Ramanathan, had his wings clipped and powers drastically curtailed. Surprisingly, he remains on the board of directors. Dinesh Shah, a senior vice president at SHCIL and RK Bansal, the whole-time director nominated by IDBI Bank, are the new additions on the board. With Nitin Jog, a SHCIL nominee already in the board, this structure ensures control of SHCIL over SSL.
The parent company, SHCIL, has also undergone important changes. An extraordinary general meeting (EGM) scheduled for 20 June was cancelled at the last moment when the three directors who were to be removed chose to resign. R Jayaraman Iyer, SHCIL’s controversial chairman who was sent on mandatory leave on 15 April, was originally deputed from IDBI Bank. He has now quit IDBI. Two other directors, T Pannir Selvam (former Chairman of Union Bank of India) and T Narasimha Rao, an independent director, also chose to go.
Meanwhile, Bansal has held several meetings with the three shadowy private shareholders of SSL to buy back their holding. Of these, Padma Subramaniam, wife of Dr V Subramaniam, an SSL director, has already agreed to sell back her 10% stake. The Vaishnavs, Gopika and her son Nilesh, together hold a 33% stake and, although they are willing to part with their shares, they are understood to be seeking to hold on to 11% of the equity. The source of their strength in continuing to negotiate is rather unclear. However, SHCIL’s own shareholding, along with the 10% of Subramaniam and 21% from the Vaishnavs, would give it a majority control with a 51% stake.
We learn that Bansal has already met Andrew Quek, the Singapore national who owns the biggest chunk of shares in SSL (a 33% holding plus 7% convertible preference shares) through an entity called E-Ventures. The outcome of that meeting is not clear. Our sources however say that SHCIL is unlikely to stop at majority control and will aim at buying back 100% of the shares.
Amidst all these moves, a series of inquiries into the bizarre goings on at SHCIL and SSL have finally begun. The Central Bureau of Investigation (Economic Offences Wing) through its SP Sanjay Saxena has sought documents relating to this scam, the Bombay Stock Exchange (BSE) has stirred itself into starting an audit. My sources say that the Central Depository of Shares Ltd (CDSL) has cancelled the SSL’s licence as Depository Participant (which was still to be activated).
Curiously, despite all the talk and seminars about corporate governance, nobody is talking about the abdication of responsibility by SHCIL’s board comprising government-appointed directors, who allowed such daylight robbery. The capital market regulator, the Securities and Exchange Board of India, which has registered several of SHCIL’s businesses and regulates them, continues to remain silent. But that not does deter it from vocally preaching good governance everywhere.