Rohtak (Haryana): India today ushered in Mobile Number Portability (MNP) that will allow cellphone users to switch operators without changing numbers, with telecom minister Kapil Sibal launching the service in Haryana, reports PTI.
The rest of India would get to use MNP from 20th January, next year.
The consumer friendly service was mooted over two years ago and was planned to be implemented by end of 2009. However, the implementation had to be deferred several times owing to reasons ranging from lack of preparedness of operators to delay in appointment of an agency to oversee MNP execution.
MNP would bring in a much-required change in the quality of services as well as attitude of the operators towards redressal of grievances in order to retain subscribers.
As per the eligibility criteria, there should not be any outstanding payment by way of pending bills before customers can apply for availing of MNP services, the Department of Telecom (DoT) said.
It also said that the mobile number sought to be ported should not be sub-judice and also there should not be pending request for change of ownership of the mobile number.
The DoT has claimed that the entire process of switching operators would take a maximum of seven days and subscribers may face disruption of services for about two hours during that period.
The one-time charge that needs to be paid by subscribers would depend on operator-to-operator, but the charge cannot exceed Rs19.
Any mobile subscriber must have used the number for at least 90 days before availing of MNP service.
India has more than 700 million subscribers across the country with nearly 10 operators in each circle.
India Infoline, which arranged to transfer Rs446 crores from four hapless foreign institutional investors (FIIs) to Money Matters Financial Service, clearly did not do the due diligence on the company while pocketing fat fees
Yesterday, Moneylife was the first to report that the Central Bureau of Investigation (CBI) was questioning Money Matters officials in a multi-crore scam (Read: 'Money Matters Financial raided by Central Bureau of Investigation' at http://www.moneylife.in/article/4/11505.html). We pointed out how Money Matters had managed to raise over Rs4,460 million from four foreign institutional investors (Morgan Stanley, Wellington, Fidelity and GMO) just a month ago, through a Qualified Institutional Placement (QIP) that was brokered by India Infoline (IIFL).
We gather that investors are incensed that IIFL did a shoddy job of the due diligence while making the QIP. FIIs are privately accusing IIFL of ignoring malpractices by Money Matters and pocketing merchant banking fees.
However, IIFL is arguing that it was not aware about how Money Matters really functioned, or the scam in the company. But this rings hollow. Moneylife has come across an IIFL report on Money Matters that was issued just four days before the scam was revealed. The report is a very positive one.
We also gather that IIFL is now arguing that it hasn't been able to communicate with the four QIP investors since the scam broke. One can be pretty sure that its phones are ringing off the hook with angry clients bent on discarding the broker from their empanelments. Indeed, angry FIIs have sold the stock heavily today. It was down 14.83% on the National Stock Exchange.
This raises the question as to why merchant bankers should be allowed to collect fat fees for issues if this is the level of due diligence they offer? And why such a poor job on the due diligence should not be punished with the imposition of standard stringent fines, and suspending such entities from the market for some years at least?
It is very clear that either IIFL did not do the due diligence which it claimed it had done, or it did it so shoddily that it was not aware of how the company really functioned. For, it helped raise $100 million for Money Matters through a QIP concluded on 20th October. Just a month later (in a report to institutional clients dated 22nd November), IIFL encouraged clients to buy the stock for a 24% upside. The IIFL report says: "Money Matters Financial Services (MOMF) is a niche player in loan syndication with strong origination and distribution capabilities, as evidenced by its volume of throughput and client roster. We believe the company is well-positioned to capitalise on strong demand for syndication over the medium-term, arising from large investment needs of the corporate sector, while its lending operations provide an added boost to earnings. We expect MOMF to deliver EPS CAGR of 33% over FY10-FY13, driven by a rise in syndication volumes, stable fee level, and high spread from down-selling."
The report contains a large graph detailing the process that Money Matters follows for debt syndication and it claims that the "internal process reveals a complex web of processes, requiring client handholding by the syndicator at every step of the process."
The IIFL report says that MOMF placed Rs440 billion of loan/debt during FY09-FY10 across various sectors. The company's debt syndication activity is principally concentrated in capital-intensive industries such as infrastructure, power, real estate and financial services. MOMF derived 88% of its consolidated revenue in FY10 from loan and debt syndication and loan restructuring activities and the rest from securities trading, lending and equity and debt brokerage.
MOMF's key competitors include banks with strong debt syndication capabilities, primarily SBI Caps, Axis Bank and YES Bank. The company has a well-established team of over 100 professionals for origination and placement activities, with strong corporate and institutional relationships. On the other hand, the company has seen considerable attrition at the senior management level during FY10.
MOMF had 9 million shares outstanding end-FY08. In FY09, the company undertook a rights issue at par, offering two shares for each share held, raising Rs180 million. In addition, stockholders were given one warrant for each new share, aggregating to 18 million warrants. The warrants were exercisable at a 20% discount to market price up to September 2010. Subsequently, the subscription period was extended to March 2014.
The management gave up its share of warrants in the third quarter of FY10, so currently there are 3.7 million warrants outstanding. MOMF undertook the QIP in Q3FY10 and raised Rs4,450 million, which it proposes to use for lending purposes. MOMF plans to capitalise on its client knowledge and flexibility vis-à-vis large banks, to provide loans to client where a regulatory arbitrage opportunity exists. The company eventually plans to sell down these loans to banks, to capture the spread.
Private equity firms and foreign institutional investors attract a lot of admiration. Of late, several big boys from the institutional world have suffered heavy losses in their multi-million dollar investments
A relatively obscure firm, Money Matters Financial Services, is now a household name in India, for all the wrong reasons. Reports of its involvement in bribing senior officials of public sector banks and institutions, for facilitating big-ticket loans to property developers, has raised many eyebrows. But what still remains a mystery in this saga is how this firm, with questionable pedigree, managed to attract a stupendous Rs445 crore from renowned institutional investors, just one month before its chairman, Rajesh Sharma, was under CBI investigation for brokering deals through political connections. Four FIIs-Morgan Stanley, Wellington, Fidelity and GMO-put in as much as 60% of the funds into the firm through a qualified institutional placement (QIP) in late October.
After recent developments surrounding the firm, these renowned institutions have seen massive erosion in their investment, with the stock price of Money Matters Financial Services plunging 46% from Rs787 in late October to Rs425 today. It leaves one wondering what due diligence was carried out by these high profile investors. But this is not a one-off hiccup; several leading private equity players have been finding themselves at the wrong end of the bargain recently. The aura of infallibility surrounding these firms has taken quite a knock as a result.
Several leading PE firms have recently cashed out of their investments, booking substantial losses in the process. Two years ago, New Silk's investment in high-profit 9X media group crashed and burned. The most recent instances are the exits of Warburg Pincus and ChrysCapital from auto components manufacturer Amtek India. Warburg Pincus recently sold over half of its 7.45% stake in the company taking an estimated 63% hit on its portfolio. This was followed closely by the exit of ChrysCapital from its entire 8.17% stake in the company, which is estimated to have put it in the red by up to 20%. Another PE firm, Citigroup Venture Capital International (CVCI), carved out an 11% loss when it cashed almost 7% of its 10.44% stake in Jindal Drilling recently.
It is unusual for PE firms to report such heavy losses, when they are known to make multi-fold gains from their investments in small, growing companies. They are usually known to march in with oodles of cash, pick up gigantic stakes in growing businesses, often work with the management to improve performance and almost always, exit at a massive profit. The multi-billion dollar deals inked by these high-profile firms make the headlines for the whopping amounts invested, as also for the fabulous returns generated on those investments.
This has even led to an assumption that PE investments can rarely go wrong, that their ideas always work out in the end. For, PE firms are supposed to be ideally equipped for stock-picking as they are armed to the teeth with expert knowledge of companies, sectors and markets. They are supposed to be highly selective and undertake detailed research, before plonking big amounts of money into companies that have great potential. They make bigger, more concentrated and longer-term bets on companies than any other kind of investor.
History is filled with glorious tales of big-ticket profits made by PE firms. ChrysCapital's entry and exit from Suzlon and Shriram Finance at huge profits were the envy of the PE community some years ago. Last week itself, ChrysCapital reportedly made a blockbuster exit from software giant Infosys at a phenomenal profit of almost 130%.
So what went wrong with the recent exits by some of the leading players in this field? Warburg Pincus is to be blamed for making the purchase at an inappropriate time-it bought the bulk of its stake in the fourth quarter of 2007, which was near the market peak. ChrysCapital's investment in around mid-2008 also was not exactly a perfect time to enter the stock. CVCI suffered a similar fate. However, Warburg Pincus also made a terrible bet on Moser Baer. This was one stock about which the market was always sceptical. Its accounting was seen as unreliable, especially since CDs (compact discs) were hardly a high-margin business. Very few FIIs seriously bought this stock. Warburg Pincus was alone in keeping the faith for a very long time, which turned out to be misplaced.
This only proves that even the most seasoned experts are just as prone to making wrong judgements as anybody else. Things don't always work out as desired for professionals too.