5. INDIA: STOCK MARKET

5

THE STOCK MARKET

       The Initial Public Offering (IPO) of a private company, on 30 July 2004, was subscribed 8 times. 60 % of the offer was reserved for Qualified Institutional Bidders (QIB). The Foreign Institutional Investors (FII) limit in the company was 24%.

     Individuals were given Re.10 lakh each from banks to buy shares. Exploiting this some might have availed themselves of the loan from different banks.

      Some newspapers, on 14 August 2004, reported that $450 to $ 500 million of foreign money would flow into India to buy the shares of a private company. They said this to enable some companies to take money abroad for acquisitions.

     A big private company came out with a public issue in the last week of July 2004. The LIC and the nationalized banks released a huge amount of money to the public to buy its shares.

   On 23 July 2004 the Union Government gave a loan of Re. 362 crore at 6.1% interest to the Unit Trust of India (UTI) for meeting the shortfall in its assured return schemes.

       However, a newspaper said that the Indians used pen and not sword to argue against foreign investments. The paper in another place said that enemy was within, and it was going to be more difficult to engage.

        

On 27 September, 2004 an Indian company listed its securities on the New York Stock Exchange (NYSE). It was the first Indian Engineering Company to list its securities on the NYSE.

The initial public offering (IPO) of Jet Airlines on 18 February 2005 received bids for 7.32 crore shares against the issue size of 1.72 crore. The Hindu reported that the domestic and international institutional investors were actively placing bids and they placed eight times the maximum allowable shares. The bidding price band was Re. 980-1,125 and majority bids were received at the upper end of the price band.

 As in the case of the TCS, the financial institutions released over Re.7000 crore to buy the shares of Jet Airways. The Union Cabinet would not have discussed the pros and cons of buying these shares. It is not clear whether the Cabinet Committee on Economic Affairs or any Group of Ministers discussed it or not. There were many such committees during the NDA rule to circumvent the Constitution. 
A decision of a Group of Ministers or even the decision of the Cabinet Committee on Economic Affairs cannot be equivalent to the decision of the Union Cabinet because these Committees and Group of Ministers are at best parts of the Union Cabinet only and the parts can have no real power.

     The New Indian Express on 3 March 2004 reported that Reliance Infocomm sold 86 lakh shares of the ONGC for a value of Re.746 crore through a block deal making a profit of Re.100 crore in less than 18 months. The NDA Government, while selling the shares said that it was selling shares to the public. But what happened? The Reliance cornered it!

As a reply to the letter No.52 dated 22 June 2005, Mr. M.Damodaran, Chairman, Securities and Exchange Board of India (SEBI), on 27 June 2005 said that the SEBI was contemplating strong action against vanishing companies and unscrupulous promoters particularly those companies that amassed crores of rupees from gullible investors on the 1990s primary market boom.

Now, there were reports that the public issue of the Syndicate Bank was oversubscribed by 32 times. The media brigands did not publish the views of the public in this matter.  52 letters also went in vain as the Government rejected the demand to reserve the shares to various States.