[aaykarbhavan] Business standard news updates 3-11-2012

Mallya underSebi lens

NON-DISCLOSURE OFSTAKE SALE PALAKSHAH & SAMIE MODAK Mumbai, 2 November Vijay Mallya's cup of woes is brimming over. The Securities and Exchange Board of India (Sebi) has asked the UB Group chairman and United Breweries Holding Ltd (UBHL) to give information on the recent share sale by three of Mallya's companies that led to a reduction of promoter holding in UBHL from 51.5 per cent to 43.09 per cent. Mallya had sold 8.41 per cent stake in UBHL from June to September — a period when the the company's scrip was enjoying a dream run. However, no disclosure of share sale was made to the exchanges, in violation of Sebi's Takeover Regulations and Prohibition of Insider Trading Regulations. Under these rules, promoters have to disclose within two working days to the regulator and exchanges any change in shareholding pattern, if they are involved in buying or selling of shares. Sources in the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) confirmed they had not received any disclosure regarding stake sale and that they had already asked the company to clarify on this. Sebi sources said the regulator might also issue a showcause notice to UBHL promoters, if their response was not satisfactory. UBHL is a holding company of Mallya's other firms United Spirits Ltd (USL) and Kingfisher Airlines (KFA). The UBHL stock price had rallied on reports that global spirits major Diageo might buy stake in USL. UBHL holds 18.03 per cent in USL and would have been the main beneficiary if Mallya had managed to clinch the deal with Diageo. An emailed questionnaire and SMSes sent to the UB Group spokesperson on Thursday did not elicit any response. The UBHL scrip had seen a three-fold rise from its 52-week low of ~53 in June to touch a high of ~155 in September on the Bombay Stock Exchange (BSE). From July to September, Mallya sold stake in UBHL through three of his firms — Mallya Pvt Ltd, Kamsco Industries and Gem Investment and Trading Pvt Ltd — making around ~55 crore (based on the company's average stock price during the September quarter). "Sale of any substantial holding must be followed by public disclosures under the takeover and insider trading regulations. Non-disclosure can have serious consequences, specially if it is deliberate," said Sandeep Parekh, founder, Finsec Law Advisors. According to J N Gupta, founder of Stakeholder Empowerment Services, a proxy advisory firm, Sebi can issue a showcause notice and impose heavy penalty. "Now, the action should be at Sebi's end. This (non-disclosure of stake sale by promoter) is a serious matter and should not be allowed to pass without appropriate legal action or prosecution," said Gupta. Both Gupta and Parekh are former executive directors of Sebi. Diageo plc had been in talks with USL and UBHL on a possible transaction, following which UBHL's share price touched a 52-week high, even as there was no certainty on whether or not these discussions would lead to a deal. The USL share price, too, saw a near-four-fold rally — from ~450 in January to a high of ~1,424 on October 23 — on rumours of stake sale. According to equity analyst SP Tulsian, the violation is serious as Mallya had confirmed he was in talks with Diageo to sell stake in USL. However, Tulsian said there were at least 100 companies that had failed to disclose the change in shareholding pattern, even in cases where open offers were triggered. "Many companies have escaped in the past five years for lack of adequate monitoring system. But Mallya's case is serious due to deal talks," he said. The UBHL chairman sold 8.41% stake during June-September period CHANGING STRUCTURE Promoter shareholding pattern in United Breweries, September 2012 Company June September Mallya PvtLtd 3.62% 0.03% Kamsco Industries 3.62% 0.03% Gem Investment& Trading PvtLtd 1.60% 0.37% Total promoter holding 51.50% 43.09% CASHING OUT Promoter holding fell by8.41% during the Jul-Sep period (in %) Promoter FII DII Others Mar-12 Jun-12 Sep-12 Source: BSE Vijay Mallya 38.66 43.09 24.86 15.63 51.50 24.31 15.91 8.28 4.40 51.50 13.85

 

CDR sees 50% rise in referrals NAMRATAACHARYA Kolkata, 2 November Banks' corporate debt restructuring (CDR) cell have over a year seen a nearly 50 per cent rise in aggregate debt sought to be rolled over. The iron and steel sector contributed 24 per cent or nearly half the rise. As on September, the CDR cell received proposals for restructuring aggregate debt worth ~245,928 crore, against ~164,294 crore as on September 2011. The respective numbers of companies involved were 466 and 341. At present, there is ~31,118 crore of debt from a total of 64 companies under finalisation for a restructuring package. Iron and steel companies continue to top the list, with a year-on-year rise of 18 per cent in restructured debt, about ~44,340 crore from 39 cases. On a quarterly basis, aggregate debt in the CDR cell rose; as on June, it was ~227,021 crore from 63 cases, against ~245,928 crore from 75 cases in September, a rise of eight per cent. The iron and steel industry comprised 24 per cent of the total in the CDR cell as on September, followed by the infrastructure sector at nearly 10 per cent. In recent months, several small steel producers have sought debt restructuring due to impaired cash flows and areluctance to sanction fresh loans to the sector. Prior to the economic crisis of 2008, several steel makers had taken huge debt exposure, due to good demand. In addition, the cost of raw materials had shot up in recent months due to the clamp on iron ore mining in several states. Chauhan takes overas BSE's MD & CEO BS REPORTER Mumbai, 2 November Ashish Chauhan, who was today appointed the new managing director and chief executive officer (CEO) of Bombay Stock Exchange (BSE), will have his hands full. Apart from the challenge of competition from rivals, Chauhan's top priority will be to get the country's oldest stock exchange listed by next year, said a source close to him. Chauhan had recently announced that BSE was working on the process to get listed and the bourse has set up an IPO committee. "We are in the process and we hope to get listed in the first or second quarter of calender year 2013," he had said. An alumnus of IIT Bombay and IIM Calcutta, Chauhan joined the BSE in 2009 and was functioning as its interim CEO for the past six months. Since joining, Chauhan played a key role in bringing significant changes to BSE, especially pertaining to technology upgradation and contributing to regulatory issues. BSE's most innovative product, the cashfutures spread (CFS), was the brain-child of Chauhan. CFS is close to a trading strategy which was used for carry forward trades in the 1990s and was the chief reason for BSE's monopoly in the market. Still, gaining market share in the equity segment remains BSE's challenge, especially when MCX-SX is gearing up for launch in the segment and National Stock Exchange is using aggressive methods to attract volumes. BSE's cash market share, that was more than 25 per cent a few years ago, is now 20-22 per cent. On average, BSE generates around ~15,000 crore worth of derivative volumes but that is aided by an incentive scheme. Also, BSE will have to make significant changes to improve its technology to get inline with global exchanges that could attract attention of large institutional traders. Experts say, BSE cannot be projected as a standalone trading platform. To be inline with global players, business consolidation is required that will make the exchange an end-to-end solutions provider. Also, the BSE will require to build a strong team of professionals as many officials have left the bourse in the past. Prior to 2009, BSE suffered major credibility and confidence crises due to legacy issues. Chauhan's profile Chauhan is a member of the Board of Governors of the Indian Institute of Information Technology, Design and Manufacturing (IIITDM), Jabalpur. He serves on Central Board of Direct Taxes (CBDT), PNG on Information Technology and Securities and Exchange Board of India's (Sebi) Primary Market Advisory Committee (PMAC). Prior to joining BSE, Chauhan worked as the President and group chief information officer (CIO) of Reliance Industries. He was ranked among the top CIOs in the world by several magazines and institutions from 2005-09. Chauhan holds a B Tech in mechanical engineering from IIT Bombay (1989) and PGDBM from IIM Calcutta (1991). Ashish Chauhan

 

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CS A  RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
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