Disinvestment double-standards

S. Vaidya Nathan

HTL Ltd has been sold to Himachal Futuristic as part of the disinvestment programme.

The fact that many PSUs have to be privatised is not disputed though this may not be the right time. The way the Government is handling the exercise is also not likely to maximise value for its holdings.

But what is galling about HTL's sale is the Government's apparent double standards in accepting Himachal Futuristic as a bidder. Earlier this year, the Government had disallowed Sterlite Industries, BPL and Videocon from participating in disinvestment.

This followed SEBI's action barring these companies from accessing the market for varying periods. This was an indictment for the market manipulation in 1998, that eventually led to a payment crisis on the Bombay Stock Exchange.

That the corporate practices of these groups leave much to be desired is reflected in the lack of investor interest in them as well as the low price earnings multiples these stocks command.

But if these companies were barred from participating in the disinvestment process for SEBI's action, Himachal Futuristic falls squarely in the same bracket. Yet, SEBI has not yet taken any action against Himachal Futuristic for its role in price manipulation.

The SEBI interim report No 1 has, however, detailed the manner in which Himachal Futuristic and Zee Telefilms channelled company funds to the Ketan Parekh group. The details brought out by SEBI show that Himachal Futuristic could be neck-deep in the Ketan Parekh-centred price ramping.

The stock rose to a high of Rs 2,387 and now trades at Rs 31. This follows the withdrawal of artificial props provided by the Ketan Parekh group with some institutional investors, including the UTI. All indications that along with Zee Telefilms, PentaMedia Graphics and Global Tele Systems, Himachal Futuristic was involved in the price manipulation in the markets in 2000.

It is just that the SEBI investigation is likely to move to a stage of imposing penalties a year or two down the line. But in substance and spirit, the deeds of Himachal Futuristic documented by SEBI are perhaps graver than those of Sterlite, BPL and Videocon.

But the Government appears to have completely overlooked the company's de facto indictment in the SEBI report. If the Government action is to be consistent and credible, it must have disqualified Himachal Futuristic as a bidder.

The thinking perhaps is this: If you are penalised for offences, you are out. However, you are yet to be penalised, though there is proof of your participation in acts that can be penalised, you can be a part of the system. The difference seems to hang by minor legal technicalities.

Any process that rests on such ground is bound to be unjust. But then, Himachal Futuristic has a history _ right from the early 1990s when it created a confusion in the telecom privatisation process by bidding outlandish amounts for 13 circles.

Even after seven years it is difficult to set aside the view that its outlandish bids in the early 1990s may have been just a tool to prise open the value MNC bidders attached to various circles, and throw cold water on the process.

These factors, coupled with the Government's desperation to get ahead with disinvestment, may have ensured that Himachal Futuristic got HTL. But the double standards are disturbing.

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If the Government believes in the action pursued against some companies, it should not hesitate to cancel the Himachal Futuristic-HTL deal. The Rs 55 crore (paid by Himachal Futuristic) may be a small price to maintain the credibility of the policy on disinvestment.

Tailpiece: SEBI's latest move to allow creeping acquisition by promoters of up to 10 per cent of equity without triggering an open offer smacks of promoter preference. Though this may be available only up to March 31 2002, it offers promoters a good opportunity to shore up their holdings when stock prices are low.

This is essentially a part of the package to `prop-up' the market. It does no good to the market for corporate control. Investors, needless to say, would suffer. This is on the same lines as the move to allow the Himachal Futuristic-HTL deal.