Shadow Boxing

NSE has its way on extending trading hours. But who really benefits?

The Securities and Exchange Board of India (SEBI) has allowed the Indian stock exchanges to extend trading hours from 9am to 5pm. This may put stress on human resources and infrastructure of broking firms and mutual funds. More importantly, it will not serve the real purpose—help the National Stock Exchange (NSE) to win...

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Temporary Reprieve?

SEBI committee order continues to remain hidden from the public.
But for how long?


A petitioner from Mumbai, Girish Mittal, had taken recourse to the Right to Information (RTI) Act last April asking for disclosure of the order by the Securities and Exchange Board of India (SEBI) on National Stock Depositories Ltd (NSDL) of the two-member committee comprising Dr Mohan Gopal and V Leeladhar. SEBI has kept away the committee’s order from public scrutiny for almost a year now, allegedly for self-serving reasons. In late October, the RTI appeal came up for hearing before the Central Information Commissioner (CIC). This CIC hearing concluded without a verdict and another one has been scheduled. On the petitioner’s allegation that the SEBI committee report has been withheld unlawfully and goes against the spirit of the RTI Act and the SEBI Act, SEBI replied that, since the matter involving NSDL was still under investigation, SEBI would not be in a position to make the order public. Under Section 8(1)(h) of the RTI Act, there is no obligation for the respondent to disclose any information which would impede the process of investigation.

The CIC, however, questioned the validity of this argument, since the investigation has concluded quite some time back. The petitioner had also asked for SEBI to release the minutes of board meetings held between April 2008 and April 2009. While SEBI has put up the necessary details of meetings held from December 2008, minutes of meetings held prior to that are still not in the public domain. SEBI pointed out that the Board was yet to take a decision on the minutes and, under Section 8(1)(d) of the RTI Act, SEBI was exempted from disclosing any information which would harm the competitive position of a third party.

SEBI has decided to release the information on decisions taken from 4 December 2008 onwards. SEBI claimed that any disclosure at this stage would ‘adversely impact the capital markets’ and, hence, would not be in the best interest of the public. Mr Mittal, in turn, argued that disclosing the decisions of the board would serve overriding public interest. In the end, SEBI sought more time from the CIC to come up with an adequate response for claiming exemption under the law for withholding the disclosure.
 

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SHCIL gives cash dividend of 900% by selling 2% stake in NSE

SHCIL has declared an unprecedented dividend of 900%. What is the reason behind this lavish payout?

Stock Holding Corp of India Ltd (SHCIL) has announced a staggering cash dividend of 900%. According to informed sources, this entire dividend is the amount SHCIL earned by selling its 2% stake in the National Stock Exchange (NSE). Officials from SHCIL were not immediately available for comments. SHCIL has appointed MXV Consulting, management consultants to deploy the windfall cash, but in the absence of a firm business plan for profitable deployment, SHCIL decided to pay out the money. SHCIL has realised almost Rs250 crore as staggered divestment of a part of its NSE stake via IDBI Capital Markets.
This is a bonanza for its shareholders IDBI Bank, ICICI Bank, IFCI, administrator of the specified undertaking of the Unit Trust of India, LIC, GIC and the other four general insurance companies. SHCIL sold its 2% shares in NSE through IDBI Capital Markets for about Rs250 crore, thus reducing its stake to 5%. Earlier, SHCIL had declared an interim dividend of 130%, but soon after the stake sale, it announced a whopping dividend of 900%. Last year, it had declared a dividend of 50%.

Interestingly, SHCIL's paid-up capital is just Rs21.10 crore. For FY07 and FY08, SHCIL had declared a dividend of 50% and earnings per share of Rs23.17 and Rs32.85, respectively. However, for FY09, its dividend went up to a staggering 165% with EPS of Rs31.52.

SHCIL achieved a profit before tax (PBT) of over Rs101 crore for the year to end-March 2008 thanks to a massive bull run. Its managing director and chief executive RC Razdan had announced a target to double the PBT for the year ending in March 2009. But, it was able to achieve a PBT of just Rs90.20 crore as against a target of Rs200 crore. This was covered up by paying an interim dividend of 130% and a final dividend of 35%, taking the total dividend for FY09 to 165%.

SHCIL has been deeply mired in controversy for its e-stamping project planned several years ago. It has been under investigation by the Serious Frauds Office for various shenanigans. Insiders say that this unprecedented dividend payout is given to favour the guilty and secure the protection of its shareholding institutions. After the huge dividend payout, charges against SHCIL will turn stale. If this is true, then shouldn't the Ministry of Corporate Affairs act on the SFIO report, pending since ages?

The story of SHCIL does not end here. Even market regulator Securities and Exchange Board of India (SEBI) has not renewed SHCIL's custodial license that expired on 31 October 2009, while all other custodians got it renewed for three years.

-Sucheta Dalal with Yogesh Sapkale [email protected]
 

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