September 11, 2000

A Tough decisions
It is a tough decision for the Big B. On the one hand, the stupendous success of Kaun Banega... has transformed the fortunes of AB Corp Ltd (formerly Amitabh Bachchan Corporation Ltd) and metamorphosed him from India’s most enduring superstar to the God of the small screen. No other individual can claim credit for being the sole money-spinner behind two segments of industry. The success brought to AB Corp some heavyweight investors including market operators Ketan Parekh and the other KP’s (Kerry Packer) Chanel 9. The turnaround time is almost staggering in its swiftness, from being on the verge of losing his own bungalow, Bachchan’s investors have helped him pay back all his creditors. In fact, one can almost see the process of cleaning and sprucing up the company in readiness for a public issue sometime in the not-so-distant future. The price that he will probably pay is to ditch Star TV and move over to Chanel 9, which has a tie-up with Doordarshan’s metro channel. The move could well prove another winner and further enhance his status — after all Doordarshan’s reach is still unmatched; and Bachchan’s move will open more business opportunities for Channel 9. If Kaun Banega... continues to hold the nation in thrall, then AB Corp will probably shatter the record for premium on entertainment company stocks.

Suspended ratings
In six months alone, CRISIL, the leading rating agency, has suspended the rating of 19 companies. Most of these were fairly well known at one time and have raised money either through public issues or fixed deposits. Most are on the verge of default or have already begun to default on their obligations. Clearly, one of the first actions of a company when it begins to sink is to stop a downgrade by refusing to co-operate with the rating agency. India Cements Capital is however another category — it has obtained a better rating from a competing rating firm and wants to ditch its lower CRISIL rating by refusing to co-operate. A few have claimed that Reserve Bank guidelines do not require them to get rating. For investors who have their money stuck in such companies here is a list — Gujarat Lease Finance, Bansal Credits Pvt Ltd, DSM Capitals, Amrutanjan Finance, SM Finance, Worldlink Finance, ICDS, Shoppers’ Invst & Financial Exchange, Synergy Financial Exchange, Tamil Nadu Finance, Arihant Credit Capital, Allianz Capital & Management Services, Onida Finance, Aravali Securities & Finance, BCL Financial Services, Inter State Finance, Key Corp, Mangalam High Seas (formerly Flex Finance).

No longer trustee
The Agashes who hold debentures of Montari Industries, the Bhai Mohan Singh company, were in for a real surprise. Montari stopped paying interest way back in April 1994 and has approached the BIFR for redemption. After failing to hear from the company, the Agashes approached ICICI Ltd, the Debenture Trustee, and encountered a nastier surprise. ICICI coolly informed them that it is no longer a Debenture Trustee. The strange truth about Indian style investor protection is a Debenture Trustee who has a fiduciary responsibility to investors is under no obligation to either seek their permission or inform them when it quits the job. Not even when the financial institution’s own catchword is safety and after it has collected hefty fees as a Debenture Trustee for several years.

Since ICICI has abandoned its responsibility, the Agashes have turned to SEBI for help, but so far SEBI’s record in the case of Debenture Trustees has not gone beyond compiling a list. As far as I know, nobody has ever been hauled up and asked to pay for failing in their fiduciary responsibility to safeguard investor interest by liquidating assets secured against the debentures as part of the trust deed. It would be no surprise if ICICI resigned hastily because the Trust deed itself has not been prepared. Unless SEBI finds a way to make institutions pay, the role of a Debenture Trustee will be nothing more than collecting fees.

Updated weekly.

The author's e-mail address is: suchetadalal@yahoo.com

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