17.12.2007

• Payback time for scamsters
• There is hope at last for investors who have been defrauded in IPO scams.
• The Justice Wadhwa committee that has been constituted by SEBI to compensate individual investors has worked out a compensation of Rs. 92 crore for investors who had applied for shares in the retail category in 21 IPOs during 2005-06.
• A recap about how the IPO scam was unveiled by the perpetrators:
• Operators put in thousands of fictitious applications in IPOs in retail category.
• Thousands of bank and demat accounts were opened in the names of fictitious entities.
• Post-allotment, operators transferred shares to another set of players.
• The players in turn transferred shares to financiers who had provided funds for investing in the IPOs.
• Shares were then sold on the first day of listing, making huge gains.
• What is a reverse merger?
• When a listed company acquires an unlisted company giving the unlisted company the status of a listed company, that is called reverse merger.
• India has not been having many such reverse mergers. But in US it is quite common.
• But of late we are seeing such transactions in India also.
• Low penetration of households in equity culture
• A mere 5% of household financial savings are in stocks and debentures in India.
• Exploration of oil and natural gas blocks
• We have noted on this subject recently while covering about NELP VII. Something more worthwhile coming our way includes:
• The unavailability of oil rigs seems to have curtailed the blocks on offer. Only about 18 new blocks have been put up for bidding this time, as 24 of the blocks were relinquished by earlier bidders and another 15 blocks have had no takers in previous bidding rounds.
• What is meant by more transparent bidding conditions?
• For example, declaring upfront the numerical weightages for different bid criteria and various sub-parameters.
• Just over a third of the country’s sedimentary basins have been explored to any real extent. Estimates suggest in situ crude of over 1 bn tonnes. We need to have in place a world class regulatory regime to coagulate funds flow in the sector.
• The new buzzword: de-coupling
• While globalization was the buzzword till recently, it appears to be the turn of ‘de-coupling’ this time.
• It refers to the apparent disconnect between how the rest of the world sees the future and how we (India) see it. The world is no longer one big global village; the belief that India and other emerging markets can go their own way regardless of what happens in the advanced world, is gaining ground.
• A very good piece from Rahul Bajaj
• Many a time he is dubbed as the leader of the ‘Bombay Club’ and a retrograde person when it comes to his views on opening up of our economy and further liberalization. But if you read his today’s article, he surely comes off as a reasonable person. He gives irrefutable evidence of the double standards that the west and developed world follow. I am convinced of his arguments. Take a look at some excerpts and my interpretation of his argument.
• The focus of his argument is that the cause of the appreciating rupee is not any sound strengthening of the economy. A rise of the currency backed by a consistent strengthening of the economy over the longer run can never be found fault with. But the rupee’s rise is attributable to the massive inflow of foreign funds – the FII inflows, which are short term and speculative in nature.
• When the Asian financial crisis occurred, IMF advice made matters worse. But in tackling the recent subprime crisis, the developed world had done just the opposite of what it advised the developing world during the Asian financial crisis. It bailed out the Northern Rock bank in England and infused liquidity by establishing a $100 bn bailout fund; measures which it would have seen as moral hazards, had they been done by the developing world.
• So, it would be unwise not to keep any checks on capital inflows into the country at this juncture.
• Experience in Chile (where it mandated that a certain portion of the inflows would be retained with the Central Bank in non-interest earning deposits) and the findings of the NBER (National Bureau of Economic Research of US) that the capital controls placed by Malaysia and Thailand have helped in reducing the real exchange rate pressures, confirm that we should find solutions to our problems rather than follow someone else’s prescriptions.
• Detonators in mining and security
• I was recently on a visit to a detonator manufacturing company. I found that most of the employees are not highly educated and could perhaps be easily carried away by some misguided elements into following some wrong philosophies. I was shuddering at the possibility of the detonators being smuggled out by the employees of the company and quizzed the head of the company about it. Though he showed the systems that are there in place to ensure strict accounting; I remained a bit skeptical.
• Today’s news item which is reporting the possible separation of possession and sale of explosives does point to the right direction. The proposed changes in law mean that the company licensed to sell explosives would not be allowed to use them and a company licensed to use explosives would not be allowed to sell them. This can put a lid on the possible ‘leakages’ that can occur in the system.
• Protection of public servants
• With the recent spate of attacks on junior doctors and the resultant strikes by them in AP, the issue of protection of public servants while performing their duty has occupied public mind.
• Section 353 of Indian Penal Code laid down that assault or use of criminal force to deter a public servant from the discharge of his duties was a punishable offence with imprisonment of a term of two years or with fine.
• Integrating EU
• The EU is on course to extending the Schengen borderless area to 9 more countries this week.
• EU citizenship guarantees right of entry into all the 27 members states regardless of one’s circumstances.
• The 1985 Schengen Agreement is an agreement among some European countries which allows for the abolition of systematic border controls between the participating countries. It also includes provisions on common policy on the temporary entry of persons (including the Schengen Visa), the harmonisation of external border controls, and cross-border police co-operation. By the 1999 Treaty of Amsterdam, the agreement itself and all decisions having been enacted on its basis had been implemented into the law of the European Union.
• A total of 30 states, including all European Union states and three non-EU members (Iceland, Norway, and Switzerland), have signed the agreement, and 15 have implemented it so far. The Republic of Ireland and the United Kingdom only take part in the police co-operation measures and not the common border control and visa provisions. Border posts and checks have been removed in the Schengen area states and a common 'Schengen visa' allows tourist or visitor access to the area.
• Surprising but true!!!
• The bald or hairy rule; the rule of thumb for Russian leaders.
• In the last 130 years of Russian history, the position of the head of state, has religiously alternated between a bald person and a hairy person.
• This was from 1881 when the balding Alexander III took over from his hairy father.
• India’s F1 win
• Narain Karthikeyan won his maiden A1 GP race at the Zhuhai International Circuit in China yesterday.
• The last time he won a race was when he clinched the Spanish leg of the Nissan World Series in October, 2004.