Five top-level changes likely at SEBI by August

The impending changes in high-level decision making positions at SEBI are being eagerly awaited in the backdrop of a number of new regulations proposed by SEBI in the areas being handled by the incumbents

New Delhi: A major makeover may be in the offing at the Securities and Exchange Board of India (SEBI), with as many as five new faces expected to join in the market regulator's leadership positions over the next few months, reports PTI.

The changes-in the positions of two whole-time members and three executive directors-would follow the appointment of a new SEBI chairman, UK Sinha, in February.

The nine-member SEBI board comprises a chairman, three whole-time members, two independent members and three nominee directors, including one each from the Reserve Bank of India, finance ministry and ministry of corporate affairs.

The three-year terms of two whole-time directors, MS Sahoo and KM Abraham, are ending in July and the government has already begun the process of finding their replacements.

The finance ministry had in February invited applications till 30th March for the two positions, but has now extended the deadline till 18th April.

Before beginning the search process, the finance ministry had asked former SEBI chairman CB Bhave, and later his successor too, about whether the two incumbents should be granted extension.

Besides the chairman, another change recently occurred in the SEBI board as corporate affairs secretary DK Mittal replaced his predecessor R Badyopadhyay as the nominee of his ministry.

Even as the search continues for two whole-time members, the tenure is also ending for three executive directors, namely KN Vaidyanathan, JN Gupta and J Ranganayakulu.

These three persons have some key portfolios under their charge. While Mr Vaidyanathan is in charge of mutual funds, JN Gupta takes care of secondary markets and Mr Ranganayakulu heads the legal affairs and enforcement departments.

While the appointment of new whole-time members would be done by the finance ministry, SEBI conducts the search process for executive directors and then suggests the prospective names to the union government.

The two-year term of both Mr Vaidyanathan and Mr Gupta would end in July, while Mr Ranganayakulu's three-year tenure ends in August this year.

The impending changes in high-level decision making positions at SEBI are being eagerly awaited in the backdrop of a number of new regulations proposed by SEBI in the areas being handled by the incumbents, a senior official said.

Some of the major actions taken by SEBI in recent months concerned mutual fund space, while final rules are awaited on issues like new takeover norms and governance and ownership structure of stock exchanges.


Favourites allotted 2G spectrum: CBI

The CBI probe revealed that Mr Chandolia put pressure on officials to allocate spectrum licence to Swan Telecom in preference to Tata Teleservices which, as per the DoT policy, was the preferred firm for allocation of spectrum in Delhi

New Delhi: The allegation that second generation (2G) spectrum was allocated to a few favourites of former telecom minister A Raja and his associates was clear from the Central Bureau of Investigation (CBI) probe which showed that Swan Telecom promoter Shahid Balwa obliged one of them by taking his property on rent at an exorbitant rate, the CBI has said.

The agency said Mr Raja's personal secretary RK Chandolia, an accused in the case, had rented a south Delhi house to one of the companies of Balwa at a monthly rent of Rs63,000.

"Investigation has also disclosed that accused RK Chandolia rented his residential property C-6/39, second floor, Safdarjung Development Area, New Delhi to Associated Hotels Pvt Ltd (a sister concern of D B Realty) on 3 March 2009 on a monthly rent of Rs63,000," the charge-sheet in the case filed in a special court said on Sunday.

In order to favour Mr Balwa, Mr Chandolia had threatened several senior telecom ministry officials to ensure grant of spectrum to Swan Telecom which was ineligible for it, the CBI said.

The CBI probe revealed that Mr Chandolia put pressure on officials to allocate spectrum licence to Swan Telecom in preference to Tata Teleservices which, as per the Depart of Telecommunications (DoT) policy, was the preferred firm for allocation of spectrum in Delhi.

The CBI, which filed its first charge-sheet before a special court on Saturday, alleged former telecom secretary Siddharth Behura, Mr Raja's personal secretary RK Chandolia and Swan Telecom promoter Shahid Usman Balwa and Sanjay Chandra, MD of Unitech Wireless, entered into a conspiracy for manipulating the procedure for allocation of spectrum with the aim of favouring companies like Swan Telecom and Unitech Group.

The charge-sheet, running into about 80,000 pages and brought in seven steel trunks, was filed before CBI judge OP Saini in a special court constituted exclusively to try the case that is being monitored by the Supreme Court.

Others named in the charge-sheet include Vinod Goenka, a director of Mumbai-based DB Realty, which was also the promoter of Etisalat DB, Sanjay Chandra, managing director of Gurgaon-based real estate company Unitech and Unitech Wireless (Tamil Nadu) Pvt Ltd and Gautam Doshi, Hari Nair and Surendra Pipara, group managing director and two senior vice presidents of Mumbai-based Reliance Telecom Company.

The investigating agency will file the supplementary charge-sheet by 25th April and is likely to complete its probe by 31st May in the case that has dented the UPA government's image in less than two years of its return to power.


International Paper’s takeover Andhra Pradesh Paper Mills may not be a trend-setter

International Paper’s aggressive investment in APPM has sent the Indian paper industry soaring into the stratosphere. It is likely that long-held valuation parameters will be rewritten, but small investors will do well to tread with caution rather than take to misinformed exuberance

Memphis based International Paper Inc (IP) has made a foray into the thriving Indian paper industry with a massive $319 million deal with Andhra Pradesh Paper Mills Ltd. The announcement made Tuesday last week by L N Bangur set off a wild spate of revaluation for the leading players in the paper industry. The deal includes $257 million in cash for the promoters' 53.5% stake besides an additional payment of $62 million for a non-compete arrangement.

In a move that caught the markets by surprise, IP agreed to pay Rs544 per share, a premium of about 205% on its market price at the time. In the few days since then, APPM has shot up to Rs283.35, spurting on low volumes while breaching the circuit each trading session.

It isn't entirely new for an acquiring company to pay a premium to acquire a controlling stake, especially in an overseas market. However, the extent of the premium paid in this instance is bound to excite conversations for some time to come.

The $25 billion International Paper is a market leader with operations in over 24 countries, but no presence in India before this acquisition. APPM is a leading player in India with a production capacity of 250,000mtpa (metric tonnes per annum). The Bangur group company is also known for its green manufacturing initiatives, with sales of approximately Rs720 crore per annum.

International Paper will spend another $104 million to complete the mandatory open offer for an additional 21.5% of APPM's outstanding equity. It is expected that IP will complete the formalities by the third quarter of FY2012, by which time it will own 75% of APPM.

The acquisition allows International Paper to hedge for growth with many of its current markets stagnant or in decline. India is among the fastest growing paper markets in the world-Poyry, an independent consulting firm specialising in the paper and pulp industries-estimates that India will witness CAGR (compounded annual growth rate) of 5.5% compared to 4.8% in China, marginal decline in Europe and just 0.5% growth in North America.

The fact that per-capita consumption in India is relatively low also makes the industry believe that there is huge untapped demand. A renewed thrust by the government through policy investments in the education sector also adds fuel to these aspirations. According to Poyry's data from 2009, consumption in India was rooted at just 8kg against 63kg in China and 227kg in the USA.
John Faraci, Chairman and CEO of IP said, "APPML is an established and highly respected company in India, and is an excellent platform for International Paper to grow in the Indian paper and packaging markets."

Meanwhile, the markets have gone into a virtual frenzy sending the prices of paper stocks soaring into the sky. Besides APPM, trading in stocks like West Coast Paper, Star Paper and ABC Paper-relatively smaller players-hit the upper circuit. Fancied players such as Ballarpur Industries and JK Paper also recorded massive gains to close at a new high.

The average valuation of Indian paper companies is about 7 times earnings, while IP has paid about 32 times APPM's 2010 earnings. It is no wonder that analysts are scrambling to discover new ways to evaluate the otherwise neglected industry. Interesting enough, BILT decided to delay its plans to raise $330 million by listing on the London Stock Exchange in order to review their valuation metrics and benefit from the developments at APPM.

At the end of Friday, there were outstanding 'buy' orders for more than 4,000,000 shares of APPM against 'sell' orders of just over 10,000 shares reflecting the mad rush to benefit from the changed circumstances. A similar trend is also evident in almost all the other players in the paper industry.

It is evident that the paper industry is all set for a rerating by the markets. But it is also likely that there might be a further consolidation of the fragmented sector as it takes a long time to build up capacities in this capital intensive business.

Given the circumstances it would be better for the small investors to avoid the risks associated with the current frenzy. It will be wise to look at the sector once the changes play out to identify and invest in fundamentally sound stocks to benefit in the long term.




6 years ago

what shd I do if I hv APPapermill 500 Shares @Rs 165....



In Reply to SNEHALBHAI TELI 6 years ago

Throw a party! Don't forget to invite me! :-)

Sell now. This is a very good price. Dont be greedy. If u waint till open offer, 43% of your shares will be accepted at 544 and balance will come back to 175-200 range. Avg would be lower than current price. I think there's definitely something fishy about offering such high valuation. Other paper makers would have fallen over each other to offer their company at half the valuation offered by IP.


6 years ago

factual errors:

Para 3: stock prices do not BREACH circuit but REACH circuit.

3rd last para: There can not be pending sell orders in a stock on upper circuit.



In Reply to manoj 6 years ago

Thank you Manoj. Appreciate your time, it will help me exercise caution while choosing my words in the future.


6 years ago

Andhra Paper Mills deal grossly overvalued. Investors may exit the counter. The company's fortune will not change dramatically, in the near future, because of change in management.

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