Citizens' Issues
Piracy at sea and the commerce behind it –Part 1

The long term solution to piracy lies in the world reverting to ships flying with the flag of their own nationality, not flags of convenience

Maritime piracy has resumed in full force after a lull. And it mainly affects the Indian seafarer in captivity. One reason for this is the standoff between Indian government and pirates on the issue of some Somalians in Indian custody. The Somalians demand that their colleagues be released, while the law in India will take its own course. This has left Indian seafarers to rot in terrible conditions. The Kenyan invasion of South Somalia, ignored in the Indian media despite the ancient ties with the Horn of Africa, has just increased the risks. The Indian seafarers are likely to, once again, become pawns in the conflict.
From torture and beatings to starvation, as well as being denied access to any form of interaction with the authorities, Indian seafarers are in a miserable condition. They will risk their lives due to economic compulsions, and more, on voyages in waters, where Indians have traditionally sailed. Whether by conventional "dhows", or on modern ocean liners, they are the new targets, and the pirates roam from the Horn of Africa to the furthest reaches of the Southern Indian Ocean. With attacks from submarines and drones now making no difference between friend and foe, stuck on ships, retaliation is expected. Western forces seek a higher involvement of the Indian Navy.
Matters have reached a point where the demanded ransom "rates" for Indians in Somalian captivity is the same demanded from Europeans. In some cases, release is denied outright. In addition, the previous rule of "no bloodshed" is now being openly flouted, as is evident from the killing of two European tourists and kidnapping of others from the Swahili resorts in Northern Kenya near Somalia. Near death-type of torture is also being reported.
The Indian crew left behind from the ASPHALT VENTURE have still not returned, despite ransom being paid. In the case of another European owned ship with Indian seafarers onboard, the ransom amount, after almost being settled, has gone up to three times what it was a few weeks ago. This is because the insurance company of the owner refuses to come to the table anymore - having lost interest in the ship and cargo. The attack on what is called "Jubaland", at the Southern end of Somalia, by multi-national forces, is one reason.
In the midst of all this, the Indian government and private ship-management agencies have clamped down on all information. Even the families of those affected are kept in the dark. A possible reason for this could be that the real ship-owner, who is often hidden behind the forwarding address of a tax-haven seldom comes forward to help. This is because his K&R (Kidnap and Ransom) Insurance and other covers are adequate to pay for the vessel and cargo. Therefore, losing the asset is certainly profitable for the actual ship owner in a recessionary market. Consequently, the whole of the Indian Ocean has been declared a War Zone.
Brutally explained, companies find it more profitable to collect insurance on a hijacked ship. Humans on board are often seen as cheap collateral damage from the third world countries. The ship owner, or the charterer, frankly stands to gain if the hijacked ship just sinks quietly with all people on board. Therefore, only media coverage and bad publicity are a worry; hence families are asked to keep quiet by threatening to deny them their dues. They even keep the regulatory authorities, in this case the Directorate General of Shipping, quiet or as make them an accomplice.
This is why, at a workshop on piracy in the Indian Ocean, one had the amazing experience of seeing on stage a combination of NATO, British Royal Navy, EU Forces representative, Ship owners and an International Union Representative. With the Indian Government and the Indian Navy in the audience, the point that our friends from the countries, which control international shipping legislation globally were making, sounded like this:-
1) The older pirates, of Captain Blackbeard and Johhny Depp variety, were romantic creatures. Switch to slide of good-looking lady-killer type smiling white guy from Pirates of the Caribbean with sword.
2) The modern-day Indian Ocean pirates, of African variety, are terrible terrorist creatures. Switch to slide of scarred big black guy, with huge teeth grimacing, while wearing Islamic head-dress with AK-47.
3) The true pirates, wearing fine bespoke suits in global banking centres, were simply business executives. This person did not get a slide, and chose to be hidden behind global free trade anonymity armed with impeccable Queen's English.
Leading from this, we were told that it is very important for Indians to persuade the Indian Navy to provide more security to all vessels in the area, while keeping the European Navy free. This led to surprised grins from some Indians present at the workshop for following reasons:-
1) If the Indian Navy did not step out and guard the Indian Ocean, then supermarket shelves in Europe would not be able to carry the same discounted prices (as generations of people who did not really work hard for a living had got used to).
2) The European powers are busy with Libya, and maybe Syria, Iran or others would need their ships for those theatrics, or maybe even an un-announced invasion of Somalia by the Kenyans.
3) Most of all, it costs a lot of money to keep the European and NATO naval ships working in the Indian Ocean even when the dirty work below the deck was done by cheap labour from third world countries.
(Note - it is not only "flag of convenience" merchant ships that employ cheap seafarers to work in subhuman conditions. This practice is now followed by warships from developed countries also.)

(This is first part of a two-part series)


Commercial real estate overall paints a bleak picture

Phoenix Mills MC Mumbai project has Rs725.9 crore debt on its book

Even before its launch, Phoenix Mills’ Mumbai Market City (MC) project looks like it is in for tough times. A report by stockbroker Emkay Global says that the project has a total debt of Rs725.9 crore and will have to operate at 80% occupancy to break- even at their fixed operating and interest costs.

“MC Mumbai faces a huge challenge in making its assets valuable. The project has huge debt in its books leading to 80% of net rental income going towards debt servicing costs. The special purpose vehicle (SPV), Offbeat Developers, doesn’t have capital to execute Phase 2 of the project which involves office space development of 0.9mn sq ft. Phoenix Mills intends to have joint development with the SPV or buyout the whole project FSI from the SPV,” says the report.

MC Mumbai will be soft launched in November end. Phoenix Mills has borrowed over Rs240 crore on its books to provide capital to MC projects either through loans or by buying out some assets in the projects. The company is reportedly cutting down on the frills and looking to acquire controlling stakes in its subsidiaries to simplify matters.

But Phoenix Mills is not the only company facing difficulties in the commercial space. SEZs, IT parks and other commercial properties have proved to be unviable, and many realtors are looking to sell such properties off to pay off their bulging debts.

“Global economy is in a turmoil and the domestic economy has turned sluggish. As a result, many companies are either consolidating their operations of shifting to cheaper places. So many of these office spaces, which builders had intended to sell to them, are lying vacant,” said a spokesperson of a realty company.

Merrill Lynch has put up its two properties at Nariman Point for sale. Standard Chartered and Hong Kong & Shanghai Banking Corporation (HSBC) sold their co-owned property recently. HUL is also looking to sell their Worli property. “Most businesses are trying to sell their non-core assets,” said an analyst.

“India’s commercial real estate sector is in very bad shape, and things don’t look like improving even within a year. Mumbai is no exception,” said Mr Pankaj Kapoor, MD, Liases Foras, “In Mumbai, 55 million sq ft of area is lying unsold and under construction. On top of that, there is huge secondary supply.” He said that rents, even at premium locations, have come down considerably due to the glut.

Investor confidence has also suffered. RICS India Commercial Property Survey, released last week, said that capital values have already seen a decline and turned negative for the first time since 2009.  

Banks have also been urged to be careful about lending to commercial real estate projects. The Reserve Bank of India, in its Report on Trend and Progress of Banking in India 2010-11, said, “There were emerging concerns about banking sector stability related to disproportionate growth in credit to sectors such as real estate, infrastructure, NBFCs and the retail segment. The growth pick-up in commercial real estate loans also deserves attention.” From September 2010, banks’ exposure to commercial real estate has increased by 12.6%. BSE’s realty index, from November 2010 to November 2011, has fallen by 43%.




5 years ago

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Unquoted: Karma Industries, Shree Nath Commercial & Finance

Stories of price manipulation

Karma Industries  (Rs44)

From Rs23.10 on 30 April 2010, the share price of Karma Industries zoomed 643% to Rs171.60 on 4 April 2011. Moneylife wrote about this case of blatant rigging in its 5 May 2011 issue. SEBI and BSE continued to sleep and the stock was rigged up all the way another 86%. In the next two months. It made an intra-day high of  Rs319.30 on 4 July 2011, a stunning rise of 1,282%. With tax-free, long-term capital gains in the bag, the speculators started unloading the stock and the price came crashing by 85% to Rs49 in just three months. But who cares?

Shree Nath Commercial & Finance (Rs10)
Shree Nath Commercial & Finance Ltd is in the 28th year of operations. It is planning to set up a solar power project. Its income in the year ended March 2011 was Rs29 crore and its profit after tax was negligible. From a low of Rs1.84 on 1 February 2010, the share price of this company zoomed 1,698% to Rs33 on 16 November 2010. Just a few weeks later, we highlighted the intense rigging in our 16 December 2010 issue. The price jumped further still and hit a 52-week intra-day high on the BSE—Rs41.80 on 25 January 2011, a rise of 2,178% from the low of February 2010. Then started the crash. By November 2011, the price was down to Rs8.42, a fall of 80%.  After writing about a more than a hundred cases of blatant price-rigging, we no longer expect SEBI and BSE to act. Maybe the income-tax department should look at these cases. The pump-and-dump operations allow speculators, and the often the management, to book tax-free capital gains. These are not simple cases of price-rigging. There’s a full-fledged money laundering operation going on.


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