SAT upholds SEBI order; dismisses broker Shankar Sharma's appeal
Upholding the Securities and Exchange Board of India (SEBI) order to bar First Global Stock Broking Ltd's (FGSB) managing director Shankar Sharma from trading in equities market for a year, the Securities Appellate Tribunal (SAT) has dismissed his appeal against the SEBI order.
 
Earlier in February, SEBI barred Shankar Sharma from trading in securities market for one year for indulging in synchronised trades, buying and selling at the same time, to rig share prices of 10 companies in 2001. Following the SEBI order, Sharma appealed to the SAT, which stayed the debarment order in March.
 
The SAT, in its order on Wednesday, stayed the regulator's order until it heard the appeal, allowing Sharma to continue trading. It is scheduled to hold a separate hearing on 3rd November to decide on the stay.
 
In the February order, SEBI's whole-time director MS Sahoo has said, “First Global Stock Broking manager and Vrudhi Confinvest India Pvt Ltd (VCIP) had indulged in large transactions in 10 securities (Global Telesystems, HFCL, DSQ Software, Zee Telefilms, Wipro, Satyam Computers, MTL, SBI, Infosys Technologies and Sterlite Opticals) in early 2001.”
 
“As these trades for Shankar Sharma in his proprietary account, as a client of Bang Equity on the one hand and the trades of VCIP which is 100% owned by Shankar Sharma and Devina Mehra, as a client of FGSB, resulted in large-scale synchronisation which resulted in creation of large artificial volume in those shares, I hold Shankar Sharma guilty for synchronising the trades in violation of regulation 4 (b) (c) and (d) of PFUTP Regulations, 1995,” Mr Sahoo said in his February order.
 
Upholding the SEBI order and after examining the alleged synchronised trades, SAT in its latest order said, "It is true that the Broker and Sub-broker are companies but when we lift the veil, it is the appellant and his wife who are lurking behind the curtain. It is thus clear that the appellant was on both sides. He was buyer as well as the seller."
 
"We have no hesitation to hold that these trades were fictitious as there was no change in the beneficial ownership of the shares traded and it was the appellant on both sides of the trade," the order said.
 
SAT said it heard at length Somasekhar Sundaresan, the counsel for the appellant. "He (Mr Sundaresan) laid great emphasis on the theory of 'witch-hunting' against the appellant by the authorities for the appellant's association as a financier in the case of the 'Tehelka expose' on certain defence deals. Impugned action of the Board, according to him, is one such manifestation of the revengeful action launched by the powers that be. We are unable to agree with the learned counsel," SAT added.
 
Earlier, in 2001, Shankar Sharma had vociferously advanced the same 'witch-hunt' theory when he filed an appeal before SAT which was rejected by the tribunal.
 
According to media reports, Mr Sundaresan said, "The application (on the stay order) will be heard next week. We only know that the appeal has not been allowed (by SAT)."
-Yogesh Sapkale  news@moneylife.in

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PepsiCo India asks a few employees to move to IBM
Beverage company PepsiCo has asked its employees from its Indian unit to move to IBM Global Services, to whom it has outsourced some of its operations, or quit, said informed sources.
 
The sources said PepsiCo has outsourced its IT operations to IBM and wants to shift its employees from the IT, administration and accounts departments to IBM’s office at Chennai from their current base at Gurgaon.
 
However, when contacted, the company denied any such move. Mrinal Kanti Dey, general manager, corporate communications, PepsiCo India, said, “As per my knowledge, no one from the IT department or any other department has been asked to shift to Chennai and no one has shifted from any of the departments.”
 
While outsourcing was a trend more evident among foreign companies, it is slowly catching the fancy of India-based companies too. Companies like Bharti Airtel and Idea Cellular have outsourced some of their operations to other companies in the past.
 
Bharti group had outsourced network management, IT operations and call centre operations for its mobile services to four different global majors. Idea Cellular had outsourced its IT operations to IBM Global Services.
-Amritha Pillay  news@moneylife.in
 

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Tariff war leaves mobile operators bleeding

These days every other GSM mobile services provider has been bit by the lower tariff bug. The "pay-per-call" and "pay-per-second" initiative by Tata Teleservices has forced major players like Bharti Airtel and Reliance Communications (RCom) to join the tariff war. The latest to join the war is Idea Cellular, which is offering call rates as low as 40 paisa per minute.

 
While this is great for consumers, but the real question is, can these companies really afford it? And if yes, then at what cost? During the April to June quarter, all GSM mobile service providers have reported a fall of about 8% in average revenues per user (ARPU) while their total revenues increased marginally by 2.4%.
 
Following the launch of its GSM services and new plans, Tata Teleservices is gaining in terms of subscribers. Although, earlier, almost all players termed Tata Tele's tariff plans as a marketing "gimmick", now everyone is feeling the heat. Despite offering a reduced tariff plan, Bharti Airtel, the country's largest telecom services provider, reported a 10% drop in net subscriber addition in September. This is the highest month-on-month decline for Bharti Airtel, after March 2005, when its net subscriber addition fell by 22%.
 
According to Anand Rathi Financial Services Ltd, the decline in net additions may have been a key factor behind the sharp tariff cuts announced by Bharti Airtel in late September under the ‘Airtel Advantage’ scheme.
 
"We estimate RCom’s 50 paisa flat outgoing rate plan to generate 40-45 paise average revenue per minute (ARPM), including SMS, value added services (VAS), benefit of 60 second pulse and customer inertia and expect Bharti would be able to charge a 5%-10% premium given its superior branding, coverage and distribution," the brokerage added.
 
The quality of earnings would continue to deteriorate as the share of high margin 'monthly rental' declines and minutes of usage (MOU) and ARPMs decelerate at a higher rate. "While the industry has witnessed ARPM declines in the past and has been resilient through MOU increase, this time we anticipate lower MOU elasticity, if any, as well as higher churn management expenses and pressure on post-paid revenues,” said Enam Securities Pvt Ltd, in a report.
 
Enam said it believes that lower capacity expansion and creation and industry consolidation are eventual outcomes in the long run.
 
Besides Bharti Airtel, the players that would feel the maximum pressure of the tariff war are RCom, Vodafone Essar and Idea Cellular. All these mobile services providers, except RCom have witnessed about 10% drop in net subscriber additions in September. During the month, Bharti Airtel added 2.5 million subscribers while Vodafone-Essar and Idea were able to add 1.9 million and 1.4 million subscribers, respectively.
 
"Deceleration in Idea's financials would be much higher due to lower incumbency advantage, lower ARPUs and lower EBITDA percentage compared with Bharti," Enam said.

 

The tariff war started by Tata Teleservices will also affect new entrants in the mobile services market. According to a report by Motilal Oswal Securities Ltd, EBITDA break-even timelines for new entrants continue to stretch because of tariff pressures as relative tariff stability is critical for new operators to achieve break-even but pricing innovations targeted at increasing visibility are likely to continue. Competitive pressure and prospects of spectrum sharing/in-circle roaming could make new entrants reduce capacity expansion outlays, the report added.
-Yogesh Sapkale news@moneylife.in

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