ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Insider Trading SEBI on Test

Insider Trading: SEBI on Test Jairaj Kapadia 'POWER TO SEBI' has been the refrain of Securities and Exchange Board of India's chairman, G V Ramakrishna Rao. After SEBI was given official recognition as the watchdog agency of the capital market, both primary and secondary, by the government, he had claimed that it was yet a "toothless tiger". After getting legal status under the SEBI Act which parliament passed early this year, he has been pressing for more powers for the outfit of which as yet he is the sole authority. Rao has also made no bones about exercising the powers which the SEBI has so far been invested with under the Act. This, of course, is not to be faulted.

Jolted by Decontrol

Jolted by Decontrol?
Jairaj Kapadia SOME insinuations by market men apart, it is necessary to get down to the bottom of the setback in profits which the Tata Iron and Steel Company has reported for the first six months of the current financial year. Profits declined despite both production and sales recording increases in volume and sales income showing further improvement. The setback followed record profits which were reported by the company for the immediate preceding year (see table). Profits suffered even as steel was fully decontrolled in January this year and from the current financial year the company was totally free from the shackles of steel control. Is it as an irony of steel decontrol that profits went down, instead of going up, during the six months, April to May, this year? Or is the setback due to some other factors, and, if so, will the management of TlSCO be throwing light on them?

No Market for PSU Bonds

No Market for PSU Bonds Jairaj Kapadia THERE has been a virtual absence of bond floatations by public sector undertakings during this year to raise borrowings in order to augment their resources. The current year's borrowings target for the PSUs is set at Rs 6,038 crore. This is more compared to the amount of Rs 5,721 crorc the PSUs raised last year. But against the figure of Rs 6,058 crore, the amount raised so far is only Rs 500 crore. This amount of Rs 500 crore is what the Mahanagar Telephone Nigam has collected, but which it has received not with an issue of bonds, but as a loan from the Unit Trust of India. While all other PSUs have stayed back from making issues of bonds, the MTNL also has been unable to augment resources with a bonds issue. Officials in the ministry of finance are said to be agitated over the PSUs' failure to issue bonds. According to a report, the officials are examining the steps necessary to help the PSUs to float bonds and raise the required resources. A likely proposal is to allow a higher rate of tax-free interest on PSU bonds against the present permissible 9 per cent, although this year even this tax-free interest is restricted by the finance ministry to Railways bonds.

Rush of New Issues

Rush of New Issues Jairaj Kapadia ARE managements of companies coming now into the capital market declaring closures of the capital issues ahead of the issues being fully subscribed? This appears unlikely. And in any case the object of a capital issue is to raise the required amount in subscription. So why would the management of a company close its capital issue, if it is not fully subscribed, and not keep it going even with a short extension of the closing date if required till the full amount is subscribed?

Back to the Scam

Back to the Scam Jairaj Kapadia AS income-tax raids were carried out on stockbrokers in Bombay in the middle of October, the securities scam was in focus again. Not that the scam had gone out of sight, since the Joint Parliamentary Committee has been conducting its inquiry and the scam has been making news intermittently. But while the JPC inquiry was progressing, the CBI and the income-tax department had both seemed to lie low in the matter of the scam ever since Harshad Mehta, the first of the stockbrokers arrested and the last to have been released on bail, was freed from custody on September 22. So when the IT raids took place once again on stockbrokers this week, the scam shot back into focus at once. And this despite the income-tax authorities giving little away about why the fresh raids. However, following the raids there has also arisen the quesiion to what extent the investigations by the CBI and the income tax authorities had progressed.

Mock Beginning

Mock Beginning Jairaj Kapadia THE Over-the-Counter market in equity shares of companies not listed on the stock exchanges was declared open on September 29 by the OTC Exchange of India, comprising the financial institutions which were authorised some yean back by the government to establish an OTC market in unlisted scrips. But the market was not inaugurated for trading on that day with Vasundhara Rasayans, the first and the only company so far listed with the OTCEI. No trading was done and no deals were struck in the Vasundhara Rasayans scrip. And this was in spite of Vasundhara Rasayans having completed its public issue of share capital further to OTCEI listing on August 28 and having made allotment of shares to 3,172 successful applicants from among the public The situation of the market being declared open but there taking place no trading in the shares of the listed company was due primarily to the fact that Canbank Financial Services as the agency sponsoring Vasundhara Rasayans for listing with the OTCEI had not picked up the mandatory 5 per cent of the share capital issued by the company as it was required to do under the OTCEI rules. Nor did Credit Capital Finance Corporation do that, after it was appointed additional market maker in Vasundhara Rasayans scrip. Both are said to have exercised the waiver, because they were prevailed upon by the management of the company. But the two had faulted in their obligations as market makers.

A Hush-Hush Affair Again

A Hush-Hush Affair Again THE second round of divestment of public sector shareholdings for this year by the government is not to be by auction, after all, but by tender system as was the case in the first round last year. This has been announced in a notification issued by the department of public enterprises on September 21 for disinvestment of 5 per cent of the shares in eight public sector companies in which a like amount was divested also in the last year. And though the notification attracted immediate adverse reaction in the press because of the continuation of the tender system of divestment, the only change made since the notification was issued is that of an extension of the notified date for the opening of tenders from October 6 to October 14.

Corporate Profits Soar

Corporate Profits Soar Jairaj Kapadia CORPORATE profitability improved during 1991-92 despite near recessionary conditions prevailing in vital segments of the industrial sector, a study made by the Industrial Credit and Investment Cor poralion of India records. The improvement was hefty, amounting to 25.5 per cent in profits after depreciation but before interest and to 17.6 per cent in net profits.

Augmenting Housing Finance

Augmenting Housing Finance THE Life Insurance Corporation Housing Finance is to grow on the lines of the Housing Development Finance Corporation. It will go public like the HDFC and is also planning to raise funds from foreign financial institutions. Furthermore, it proposes to raise deposits from the public to supplement its resources and to serve its future operational needs as they arise.

Pathology of Small Industries

Pathology of Small Industries Jairaj Kapadia THE second all-India census report of registered small-scale industrial units which has been just released by the Development Commissioner (Small Scale Industries) is not up-to-date. It covers small-scale units which were functioning and were registered as on March 31,1988. The census, which was undertaken during the period 1989-91, features highlights of small-scale units, but emphasises also a growing number of sick units and increasing amount of funds outstanding on their part. Industrial sickness pervades small- scale units like it does large-scale units. The number of sick small-scale industrial units increased during the year from September 1989 to September 1990 from 1,86,000 to 224,000, according to the census report. The amount of funds outstan- The Week's Companies ding by them recorded an increase from Rs 2,243 crore in September 1989 to Rs 2,611 crore in September 1990. This was the amount outstanding in a total in- vestment of Rs 9,296 crore in fixed assets in the 5.82 lakh functioning units in regard to which the data was processed in the census report.

Lure of PSU Shares

an the Indian economy organised this week by the Confederation of Indian industry that within two years inflation will fall below 3 per cent and interest rates would plummet commensurately which would lead to a new wave of investment* modernisation and industrial growth. This should serve as sufficient bullish fuel to carry the stock market in due course well beyond its previous highs. Whether the finance minister's expectation will be realised only time can tell.

Corporate Democracy in Action

Corporate Democracy in Action Jairaj Kapadia IT was a couple of years ago that one first heard of the term corporate democracy. That was in connection with the Reliance bid for control of Larsen and Toubro. Because of that, though laudable, the term had looked quite as a coinage of convenience. But corporate democracy has now come into play in companies in respect of their rights issues of share capital.


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