Beyond Money
Making Democracy Actually Work

Aditya Govindaraj writes about a unique non-government organisation that tracks governance & transparency issues for the common man

 
While the popular media keep ordinary citizens informed about headline-making events, scandals and governance issues, we, the people, know so little about the state of governance of our own locality or municipal ward. For instance, how many Mumbaikars know that their municipal councillors are concerned only about renaming the roads instead of improving their quality and providing better civic amenities? Consider this data: one out of every five questions asked by Mumbai’s municipal councillors between March and December 2012 was about renaming roads. On the other hand, the total number of complaints lodged by taxpayers increased by a whopping 50%, between 2011 and 2012; a majority of these pertained to roads and drainage. In other words, little had been done to improve the sorry state Mumbai’s infrastructure.
 
Mumbaikars would never have known these surprising statistics were it not for Praja, a Mumbai-based NGO set up in 1998 by eight like-minded individuals whose goal was to establish and improve accountability and transparency in governance at the grassroots. Praja’s online portal contains almost every piece of local information that you may want to know—from the telephone number of your local ward councillor to the crime or health statistics of your ward. Mumbaikars can leverage this information in many ways.
 
For instance, the MLA’s (member of the legislative assembly) report card, which grades and ranks performance of MLAs, can be downloaded from Praja’s website. This information can be used to make MLAs more accountable, because it is invariably newsworthy for the media and easy to share on social media as well. Nitai Mehta, the managing trustee of Praja Foundation, says, “The MLA who was ranked last came to meet the team and went back satisfied with the matrix and made a statement that he would improve his ranking in the next report card. On the whole, the report cards have been a success as we have started getting many phone calls from elected representatives, citizens and civil society groups.” 
 
Similarly, Mumbaikars can leverage the ‘City Scan’ feature on the website to search for information on health, crime, education and civic issues. Praja’s volunteers use the Right to Information Act extensively to gather important and relevant statistics relating to municipal governance. The information is then compiled and uploaded on the website.
 
The ‘Citizen Charter’, one of the early projects undertaken in collaboration with the Municipal Corporation of Greater Mumbai (MCGM), was created to document best practices and standards to measure delivery of services to the public. Workshops are held to train staff of MCGM to ensure high level of service to the public. The ‘Mumbai Citizen’s Handbook’, a useful reckoner in three distinct volumes, provides useful information on how the Mumbai municipality functions. Services such as water, sewerage and sanitation, education, health, police and environment were assessed to understand the problems in the delivery of each of these areas.
 
“Praja helps the state administration at various levels, right from the municipal commissioner, chief secretary, police commissioner to the ward officers, police inspectors, which monitors the state of the city and also enables dialogues with the key stakeholders to create solutions for better governance,” says Nitai Mehta on the importance of Praja for Mumbai. Praja is run by a team of 19 with support from a board of trustees and advisors with knowledge in governance, social sciences, business, market research and media. They can accept up to 10 regular volunteers. Apart from volunteering, you could help by donating to the Praja Foundation; donations are tax-exempt under Section 80G of the Income Tax Act.
 

 

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Do companies care at all about SEBI’s diktat regarding 25% free float?

Most companies are yet to increase their public holding to the requisite level (25%) and compliance before 3rd June for companies (PSUs have to do it by August) is surely impossible. Probably they do not care at all about the SEBI diktat

 
Most companies are yet to increase their free float to the requisite level, and compliance may entail significant stake sales by promoters, which could depress share prices in the near term. The recent offer for sale (OFS) by DLF and a similar announcement by Oracle Financial are examples of companies taking steps to meet the new requirement. Oracle Financial’s share price correction, down 6% over the five trading days following its OFS announcement, is an example of what can happen if companies announce share sale to increase public holding.
 
But the fact is that prices are not falling even as the deadline nears. This only means neither the companies nor the stock market players give a damn about the Securities and Exchange Board of India (SEBI) diktat which has been around for over seven years now. SEBI has had three chairmen during this period. 
 
The guidelines issued on 4 June 2010 by the finance ministry makes it mandatory for Indian companies to have a free float of at least 25% before 3 June 2013. State-run companies or public sector units (PSU) too have to comply with these guidelines by 8 August 2013. Market regulator SEBI has clearly said that the deadlines would not be extended.
 
Companies that need to reduce promoter stakes 
 
- free float, shares, shareholding, stake, promoter's stake,
According to BNP Paribas Securities (Asia), these guidelines have created an asymmetrical situation between sellers of equity i.e. company promoters and potential buyers or secondary market investors. “The promoters have to sell by a certain date, but the buyers are not forced to buy. In fact, secondary market investors may not even be interested in buying the equities of many of the companies. This, in our view, creates downside risk to the share prices of companies that need to increase free float,” the brokerage said in a research note.
 
Companies with large share sale requirement as proportion of market cap 
 
- free float, shares, shareholding, stake, promoter's stake,
 
Few companies like L&T Finance Holdings and Bharti Infratel have more time to comply with the 25% free float requirement as they were listed after the SEBI’s announcement in June 2010. Some other companies such as Wipro, DLF and Thomas Cook (India) have already complied with the free float requirement. While Wipro transferred the promoter group’s equity shares to an “irrevocable independent trust”, DLF recently concluded an OFS and Thomas Cook (India) also carried out an institutional placement programme (IPP). 
 
BNP Paribas said, “We estimate that more than 80% of the overall upcoming share sale will come from the top 15 issuers by market cap. In isolation, $2 billion to $2.1 billion of equity sales is not large for the Indian market. However, it is a significant quantum to be completed in a 14 trading day period. Not all companies will opt for selling equity in the market through OFSs or other routes. Some may shift promoter group shareholdings to independent trusts, like Wipro did.”
 
Leading companies that potentially need to issue equity 
 
- free float, shares, shareholding, stake, promoter's stake,
PSUs are by and large compliant with the free float guidelines. There are five PSUs, which need to sell equity of about $575 million. Of these five, just one—MMTC—accounts for 80% of the total.
 
PSU companies with less than 10% free float 
 
- free float, shares, shareholding, stake, promoter's stake,
Multi-national companies (MNC) are a slightly different choice. They may choose to dilute their parent’s stake to 75% or may choose to buy more from the market and take the Indian subsidiary private. Parents of some of these MNCs, for instance Styrolution ABS, have expressed the desire to delist subsidiaries, according to a report in a business newspaper, BNP Paribas said.
 
Multinationals with less than 25% free float 
 
- free float, shares, shareholding, stake, promoter's stake,
According to the research report, some of these MNCs, where an expectation of delisting has built up in the market, announcements of stake sales by parents have come as negative surprises to shareholders and has led to significant share price declines. The recent sharp corrections in the share prices of Gillette India (10-11 February) and Oracle Financials (8th May) are two examples. It is important, therefore, to take stock of companies where potential equity sales could form a significant proportion of their market capitalization, the report said.
 
Companies that could face near-term corrections 
BNP Paribas said, “Looking at the companies that have to sell at least 10% of outstanding equity (making small exceptions for large companies like MMTC and Bajaj Corporation) and whose market cap is at least $200 million, we arrive at a list of eight companies which could face significant correction around the time of share sale. Some of these, like Gillette India and Bombay Rayon, have already faced such correction in share price at the time of the announcement of their equity sale. However, actual equity sale by OFS or IPP could lead to further correction—going by the recent examples.”
 
Companies with large share sale requirement as proportion of market cap
 
- free float, shares, shareholding, stake, promoter's stake,

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Uptrend on Sensex, Nifty may continue: Friday Closing Report

Nifty is currently in a highly overbought zone. Only a close below any previous day’s low may threaten the upmove

 
A recovery in late trade with support from power, capital goods and realty stocks helped the market recover from its lows. However, caution from ratings company Standard & Poor’s that there is a one in three likelihood of India's rating downgrade in next one year, while affirming the “BBB-” rating with negative outlook saw the benchmarks paring part of their gains.
 
The Nifty is currently in a highly overbought zone. Only a close below any previous day’s low may reverse the ongoing upmove. The National Stock Exchange (NSE) reported a volume of 66.99 crore shares and advance-decline ratio of 648:759.
 
The Indian market opened on a flat note as investors booked profits after the recent gains. On the global front, markets across Asia were subdued in morning trade on unimpressive earnings reports and weak economic indicators in the US. Markets in the US settled lower on concerns that the Federal Reserve would end its bond-buying programme later this year.
 
The Nifty opened three points up at 6,173 and the Sensex resumed trade at 20,268, a rise of 21 points over its previous close. Early buying in IT and realty sectors helped the benchmarks rise higher in early trade. 
 
The market could not sustain the gains and soon began trending lower. The benchmarks made half-hearted attempts to venture into the green, selling pressure kept the indices in the red. A weak opening of the key European indices also added to the woes of local investors in noon trade.
 
The market slipped to its low at around 2.00pm on selling pressure from consumer durables, healthcare and oil & gas sectors. The Nifty fell to 6,146 and the Sensex went back to 20,155 at their respective lows.
 
However, buying in power, capital goods and realty stocks pushed the market to its high in late trade. At this point, the Nifty rose to 6,200 and the Sensex went up to 20,328.
 
News of global rating agency Standard & Poor’s affirming India's sovereign rating at “BBB-” with a ‘negative’ outlook and cautioning that there were one-in-three chances of a ratings downgrade over the next 12 months saw the benchmarks coming off the highs, but closing in the green for fourth day in a row.
 
The Nifty added 17 points (0.28%) to settle at 6,187 and the Sensex finished trade at 20,286, a gain of 39 points (0.19%).
 
Among the broader indices, the BSE Mid-cap index gained 0.33% and the BSE Small-cap index rose 0.13%. 
 
The top sectoral gainers were BE Power (up 3.08%); BSE Capital Goods (up 2.95%); BSE Realty (up 2.02%); BSE Bankex (up 0.56%) and BSE PSU (up 0.48%). The main losers were BSE Consumer Durables (down 0.72%); BSE Healthcare (down 0.39%); BSE Metal (down 0.33%); BSE Oil & Gas (down 0.24%) and BSE Fast Moving Consumer Goods (down 0.05%).
 
Out of the 30 stocks on the Sensex, 16 settled higher. The key gainers were BHEL (up 4%); NTPC (up 2.24%); ICICI Bank (up 1.92%); Larsen & Toubro (up 1.84%) and Bajaj Auto (up 1.44%). The key losers were Bharti Airtel (down 1.96%); Dr Reddy’s Laboratories (down 1.80%); Sterlite Industries (down 1.32%); Maruti Suzuki (down 1%) and Wipro (down 0.94%).
 
The top two A Group gainers on the BSE were—ABB (up 21.01%) and Crompton Greaves (up 9.13%).
The top two A Group losers on the BSE were—Motherson Sumi Systems (down 4.11%) and Colgate Palmolive (down 3.56%).
 
The top two B Group gainers on the BSE were—Remi Metals Gujarat (up 20%) and TCFC Finance (up 20%).
The top two B Group losers on the BSE were—Infinite Computer Solutions India (down 19.97%) and Puneet Resins (down 19.64%).
 
Of the 50 stocks on the Nifty, 28 ended in the in the green. The main gainers were BHEL (up 5.06%); Reliance Infrastructure (up 3.05%); Jaiprakash Associates (up 2.69%); DLF (up 2.68%) and NTPC (up 2.49%). The main losers were IndusInd Bank (down 2.58%); HCL Technologies (down 2.42%); Dr Reddy’s (down 2.02%); Bharti Airtel (down 1.85%) and NMDC (down 1.65%).
 
Markets in Asia settled mostly higher. News that Chinese regulators will ease curbs on the refinancing process having an exposure in the real estate sector pushed the Chinese benchmark higher. Japanese stocks rose following a report that prime minister Shinzo Abe will take steps to boost lending by leasing companies.
 
The Shanghai Composite surged 1.38%; the Hang Seng gained 0.17%; the Jakarta Composite climbed 1.32%; the KLSE Composite rose 0.14%; the Nikkei 225 advanced 0.67% and the Seoul Composite settled 0.79% higher. On the other hand, the Straits Times lost 0.09% and the Taiwan Weighted fell 0.26%.
 
At the time of writing, the European markets recovered from their early losses and were 0.09% to 0.38% higher and the US stock futures were in the positive, indicating a higher opening for US stocks later in the day.
 
Back home, foreign institutional investors were net buyers of shares totalling Rs1,070.33 crore on Thursday whereas domestic institutional investors were net sellers of equities amounting to Rs390.42 crore.
 
Kirloskar Electric Company has bagged an order from the Indian Railways, albeit a small one compared to its own quarterly revenue. The company has got orders for systems which will be used in the Rajdhani and Shatabdi trains, according to an exchange notification. The stock rose 16.28% to close at Rs25 on the NSE.
 
A major fire broke out in one of the crude distillation unit of the Visakha refinery of the HPCL here on Thursday night, at around 11.00pm, and it was brought under control by 4.40am on Friday, according to a press release issued by the HPCL. There were no casualties and no one was injured. The stock declined 1.85% to close at Rs311.20 on the NSE.
 
Oil India (OIL) has demanded a revision in price for natural gas for state-owned firms alongside the planned hike in rates for private players like Reliance Industries, saying that the current margins are small. The price paid to OIL and ONGC is inclusive of royalty they have to pay on producing the gas to fields given to them on nominated basis. The rates of gas they produce, called the administered or APM gas were last revised in June 2010 to $4.2 per mmBtu from $1.79. The stock declined 1.79% to close at RS588 on the NSE.

 

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