On Kochhars & Videocon is the ICICI Bank Board itself an NPA?

Outset Disclaimer

Neither my family nor me are shareholders of ICICI Bank or Videocon.

  • I do know the Kochhars only on a casual greeting basis when we came across each other on ‘Open & Speech Days’ at the School where our children studied. I did however 14 years ago, in and around 2004, meet up with Deepak Kochhar, at his request through a good common friend, at the Cricket Club of India Swimming Pool Cafe in Mumbai to explore the possibility of advising on his Family’s Equity Portfolio. It did not happen as we disagreed on how India was taking off. I had opined that the next few years would be great & they were, with GDP at 9% & Markets zooming in the 2005-2007 period. There was no further meeting after that  
  • In the 1990’s I had a private audience for just five minutes with Mr Dhoot of Videocon, at his request, in his car after he had attended a Rotary Meet in Ahmednagar to hear my address. It was a courtesy brief engagement
  • In the past I have, at the request & invitation of ICICI Bank, conducted a two day Securities Allocation & Portfolio Management Training Workshop in Mumbai for their Private Wealth Management Clients Group Managers from across India

On Kochhars & Videocon Link Controversy is the ICICI Bank Board itself an NPA? 

Caesar’s wife must be above suspicion

It’s always got to be Substance over Form, so we’re drilled into, while studying for Professional Accounting & Auditing Qualifications

So let me state that the Kochhars & the Dhoots of Videocon go back a long way into the 1990s… more on this later below 

So while the Form may be legit, albeit through a chronological maze of shareholdings changes & transactions, the substance of these have come into public glare recently on the alleged quid pro quo between Kochhars & Dhoots

While it remains to be established by investigative agencies & SEBI on any violation of disclosure norms & any conflict of interest and this quid pro quo between the Kochhars & Videocon on the Consortium Loan of Rs 3250 crs extended to Videocon by ICICI Bank in 2012, I raise this question to the ICICI Board as am concerned & angry to say the least, with this ‘Sense of Entitlement’ that continues to prevail in the upper echelons of our Institutional, Banking, Corporate, Political & Bureaucratic World. There are figuratively & often even literally Marriages of Convenience in these circles to strengthen the nexus. Perhaps a Competitor of ICICI Bank, like alleged even in controversies before, is again at play here… but the allegations are serious enough & the Bank’s Board has to be seen to really get behind all this before giving a clean chit. The Perception is that they are not doing so & the intent for this comes into question… more so after the response of the Bank’s Chairman on the current controversy to the Indian Express raises more questions than answered.

ACT ~ Accountability, Conscience & Transparency 

For me the Simple Question in this Matter that begs an answer is this :

Is ‘D’ a ‘Duh’ to give & forgive Rs 64 crs ?

Far from it, so there has to be more to it 

Let me spell out the chronological scenario to put it in perspective “

  • Why would ‘D’ of ‘V’ in Jan 2009, within 20 days of his entering into a 50:50 JV ‘N’ with ‘K’, completely sell of his 50% in ‘N’ to ‘S’ at par & also sell of at par his own private company ‘S’ holding of 9990 shares of FV Rs 10  to a ‘third party’ (this would be his associate ‘M’), as he defends his actions to Indian Express stating “… relinquishing my right, title and interests in the said shares, giving up control and management of Supreme Energy and completely disassociating myself from both the Companies all on the same day”? 
  • Why would then ‘D’ of ‘V’ give Rs 64 crs to  Company ‘S’ from his listed ‘V’ or any other of his entities  to give to ‘N’ alleged to be a Loan which was then converted to an allotment of zero coupon Fully Convertible Debentures allotted in March 2010 & finally converted to shares in March 2016?
  • As on March 31, 2015 ‘S’ held 47496 shares in’N’ apart from the Rs 64 crs FCDs. These shares should be the 24996 shares sold by V to S in Jan 2009 as above + 22500 shares sold by ‘P’ owned by K Family to ‘S’ in June 2009
  • In April 2012, ‘I’ Bank in a consortium extended Rs 3250 crs lending facility to the ‘V’ Group of ‘D’
  • In September 2012 ‘PE’ Trust of the K Family purchased at par FV 10 all 9990 shares of ‘S’ from ‘M’ (See above to recollect… the same shares sold in Jan 2009 by ‘D’ to ‘M’ at par)… this gave ‘K’ Family ownership of ‘S’
  • In April 2013 the ‘PE’ Trust of K Family subscribed at par Rs 10 to a further 80000 shares of ‘S’ which held held 47496 shares in ‘N’ apart from the Rs 64 crs FCDs in ‘N’. This is the @ Rs 9 lakhs Equity investment in ‘S’ by  the ‘PE’ Trust of K that is the accusation levelled at ‘D’ & ‘K’ as being a pittance of a price for handing over ‘S’ to ‘K’ Family’s ‘PE’ Trust
  • So as it stands we need to question & investigate the status of the original Rs 64 crs given by the listed ‘V’ or a ‘D’ Entity or any other Entity to ‘D’s originally owned private company ‘S’. Was it a loan to ‘S’? & if so has it been returned ? or was it an investment in Equity in ‘S’? which then does not have to be returned… of course this money was in turn given by ‘S” to ‘N’ as above… this probably also explains why ‘D’ of ‘V’ sold of his 9990 shares in ‘S’ in Jan 2009 itself to an associate ‘M’ so as not to disclose the transaction as a related party in the books of listed ‘V’ when ‘V’ is alleged to have later in 2009/10 extended Rs 64 crs to ‘S’… I went through the 2009/10 Annual Report of ‘V’ & there is no disclosure of any such Loan or Equity Investment in ‘S’…. so was it routed through another company of the ‘V’ group or one of ‘D’s private companies or was it some other entity ? 

There are other Alphabets in play too (these are elaborated later below), but the above should suffice to conclude that :

  • Rs 64 crs invested in ‘N’ by ‘S’ in 2009/10  finally through FCDs allotted in March 2010 by ‘N’ was converted to Equity in ‘N’ in March 2016 & as of date both ‘N’ & ‘S’ are owned by the K Family…. so ‘N’ does not need to repay this to ‘S’…. but what about ‘S’ having to repay this to listed ‘V’ or any other ‘D’ related entity  or any other entity if it was indeed given as a loan? 
  • The ‘PE’ Trust of the K Family bought out ‘S’ at a pittance only in September 2012 after ‘I’ had sanctioned &  disbursed  consortium lending of Rs 3250 crs to the ‘V’ Group of ‘D’

To jog your memory there is an age old link between the Kochhars & Videocon even before they initiated this 50:50 JV in 2008 in NuPower Renewables

Did you know ?

  • The Kochhar Brothers, Rajiv & Deepak ran a listed company in the late 1990’s called Credential Finance Ltd. Rajiv was the Executive Chairman while Deepak was the Managing Director. It was last traded in December 2001 on BSE & BSE Records show it as compulsory delisted only last year on August 23, 2017…such a delisting,as different from a voluntary delisting, as per SEBI directives involves barring promoters from raising monies from capital markets for 10 years besides other stipulations. It was incorporated in 1992 as per MCA Records & till October 1, 1996 it’s name was Bloomfield Builders Ltd. In 1997 it’s Equity Capital was Rs 5.63 crs of Face Value 10 & it had declared a 6% dividend for 1996/7. If I remember correctly, the Shareholders included many top industrialist groups at the time had subscribed to shares at obscene premiums at the time when Income Tax Regulations to justify Issue Prices & Valuations were not in existence (these came in 2011/12). Do I need to spell out why ! Videocon directly or indirectly held a stake & it is important to note that Venugopal Dhoot’s right hand man & group financial advisor, S K Shelgikar was on the Board of Credential Financial. I recollect Credential had even sponsored a Squash Tournament as the Kochhars were avid Squash Fans & Players at the National Level. Rajiv has since promoted the Avista Advisory Group based in Singapore & India while Deepak has set up the NuPower Renewables Group

SEBI’s earlier ‘Panga’ with Videocon & Hindustan Lever & its Directors

In 1998, the infamous late Harshad Mehta of the 1991/92 Scam, through his Damayanti Group, had played up shares of BPL, Videocon & Sterlite in alleged connivance with their managements. Top Brokers too were involved as was the Shriram Mutual Fund. SEBI Chairman DR Mehta at the time in April 2001 had passed an order barring  Videocon International for Three Years from raising Monies from the Public in the Capital Markets & to pursue prosecution of the Directors, Mr V N Dhoot, Mr S K Shelgikar & Mr S M Hegde. They had appealed to the Securities Appelate Tribunal (SAT) who set aside the order in 2002 

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Kotak Group again enters beleaguered Diamond Power Infra at Rs 23.65 ~ Why?

Kotak Group enters beleaguered Diamond Power Infra at Rs 23.65 ~ Why? ~ their Mutual Fund  had been selling since August 2015 !

On March 30,2016 Kotak Mahindra (International) Ltd a FPI & a subsidiary of Kotak Mahindra Bank picked up 3868606 (6.787%) stake in Diamond Power Infrastructure at Rs 23.65 from Macquarie Bank.Deal Size thus was Rs 9.14 cr with Macquarie exiting fully

Why did Kotak buy in ! ~ as just a month ago the Trustee of Kotak Growth Fund II & PAC had notified the Exchanges that from August 2015 to March 2016 the Fund had sold 1215382 shares ( 2.13% stake) from the 3002946 shares held (5.27% stake).Over 2% had changed hands on March 2,2016 …unless these were inter scheme or within group transfers by the Mutual Fund

The above Notifications already were on the Exchanges websites but only today has the Counter seen a smart rise by over 15% to register a days’s high till now of Rs 27.95.At 12.40 pm it’s trading higher at 12% at Rs 26.60. Trading Volumes have been below One lakh most days in the Year but till now they have crossed 4 lakh on BSE and 18 lakhs on NSE

Diamond Power Infra is an interesting & intriguing case study.It’s been a rapid Wealth Destroyer of 75%  inside five months from Rs 143 levels in November 2014 to Rs 37 in March 2015 …it never was a 24 Carat Diamond ! but you can say it had all but lost whatever Carats it was ! 

Over 10 years ago  in 2005 Diamond Cables (IPO at Rs 10 par way back in August 1993),the earlier name of Diamond Power Infra, was trading low at @ Rs 17 and I spotted a turnaround when it  notified the BSE that they had the second largest cable capacity after Sterlite but were functioning at just @ 15 % capacity due to a working capital crunch.It was negotiating to receive both loan & equity support from Clearwater Capital Partners.The Deal for Zero Interest FCDs & Warrants was announced a year later in August 2006 when Price levels had shot up to Rs 60 and CCP would be getting the shares at Rs 95 on conversion…Then the Share Price simply went into 10 Bagger space inside two years recording highs of Rs 589 in 2007 & Rs 599 in 2008…. I had not waited for these record highs……. so the real wealth Destruction has been immense at the extreme of 96% from Rs 599 to Rs 22 !….even adjusting for 1: 3 Bonus in August 2013,the destruction is 95%!….CCP brought some more at fallen levels of Rs 160 levels 2010.It exited at a Loss in  June 2014 at Rs 90  & just a few months ago at a bigger Loss in December 2015 at Rs 42.68

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Essar Oil Delisting is Over or is It !? ~ Glitch or Golmaal !?

Essar Oil Delisting is Over or is It !? ~ Glitch or Golmaal !? 

Yesterday at 3.30 pm was the cut off time for all shares to be tendered in the Essar Oil reverse book building on BSE & NSE

The First criteria for the delisting endeavour to be considered successfull is that  at least a minimum number of 92,569,408 Shares be tendered  in valid bids from the 142489858 Equity Shares being 28.54% of the public shareholding that could

At  Closing 3.30 pm on Monday,December 21,2015  BSE & NSE showed aggregate cumulative bids for 101143045 shares

So then what’s the problem !?

1,98,99,305 shares from 8 bids all at Rs 262.80 are yet showing unconfirmed on the BSE Screen !

Seems there is a Glitch ! or was it a Golmaal !?….if so for what purpose ? …to derail the delisting effort !? If so ,why!?

Seems Ruias of Essar court controversy regularly….either they  follow it or it like a guided missile follows them !  

 The 8 Unconfirmed Bids for Rs 262.80 for 1,98,99,305 shares apparently is from the LIC Holdings of Essar Oil in their various portfolios

If you remove these unconfirmed bids then the valid bids aggregate just 81243740 shares which is short of the 92,569,408 shares requisite

BSE has referred the matter to SEBI for guidance as to whether they should accept the LIC Bids as confirmed and therefore valid….if they say ‘Yes’ and that it was a genuine issue by Stockholding who were unable to upload the bid as confirmed in time by 3.30 pm for LIC then we have the Discovered Price or Exit Price of Rs 262.80 provided this price is accepted by Oil Bidco( Mauritius ) Limited the Acquirer….they can of course offer an even higher price than this to garner more shares

Essar Oil has got to be extremely anxious for delisting….in 2014 I had raised a stink when they set a floor price of just Rs 108….SEBI had to stop the effort…..however they allowed it this time around  with a higher floor price of Rs 146.05….in my view they should not have until the Rosneft Deal price for acquiring 49% stake in Essar Oil which is being negotiated was announced

Essar Oil is anxious that the delisting takes place before the Rosneft deal as otherwise that would have triggered of an Open Offer by Rosneft and would have disturbed the Equity Stake Holdings by Essar Oil Promoters & Rosneft leaving Essar Oil Promoters vulnerable

Whatever ! ~ even if this delisting is allowed with LIC’s bid being accepted at Rs 262.80 the shareholders who bid below this price or the exit price to be announced by Oil Bidco  will also get the Discovered  Price which will now be established at a minimum of Rs 262.80. Oil Bidco can accept this Price or announce a higher one as the Exit Price .It of course can reject it and the delisting would then not have succeeded

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A Weak Week Gone by …Sensex shakes down 5% as Scams Surface and CBI makes ‘Listed’ arrests…have Selective Conviction

It’s been quite a weak week gone by….the Sensex shook 5% opening at 19841 last Monday but shaking in some shock down to 18955 on Friday…it has recovered to 19400 close as this week opens…..Looking beyond the Sensex shows that the shakedown has been more intense in the Mid cap and Low Cap Areas

IFCI has dropped to Rs 57 levels and IDBI Bank from Rs 200 ! to below Rs 160…both nearer Consolidated Book Value for this year….these price points offer lower risk Opportunities unless ofcourse scams unfold here too !

….what is also spooking the markets,apart from Korean War fears, is the CBI confirming a sense,long suspected by all of us really, that there have been huge sinster gameplans at work on the Exchanges…..collusions between Promoters,Bankers,Merchant Bankers,Politicians,Brokers,Fund Managers and  sadly even certain Print and Broadcasting Media…..to hype Companies and  rig up share prices to facilitate QIPs at high Prices with Fund Managers being paid off for participating in the QIPs…..it is alleged that even Exit Prices and Time Periods for this were pre decided….this would necessarily involve the need for Market Price manipulation…..where Loan has to be arranged it would involve Corruption…bribing those who can make decisions to deploy their Employers Huge Funds

CBI has made high level ‘Listed’ arrests…CEO of LIC Housing Finance….DGM of Bank of India and Independent Director of Central Bank of India,DGM of Punjab National Bank,Secretary (Investments) of LIC,CMD of listed Finance Intermediary, Money Matters Financial Services Ltd….the stink of corruption is polluting the markets….bribes being paid to Finance Heads of Listed Institutions through a Listed Financial Intermediary to faciliate Loans and QIP of Equity of hundreds of crores to Listed Corporates,especially Real Estate Companies….being ‘Listed’ seems to be the key….often manipulating the share price pays for the Corruption……..who suffers here ?….those primary market institutions and those secondary market  suckers who unknowing of this gameplan invested in the Share at an inflated price….if the situation is that of Loan Outstanding…it will probably remain outstanding till declared Non Perfoming and quietly written off after a few years !…and civil court cases takes years ! 

Maybe SEBI should report to the CBI !……..Because more often than not even this IPO High Obscene and Vulgar Pricing is a Scam of Sorts…though SEBI may argue it’s not their job to comment on Valuation and Pricing…and market forces will decide the success of the IPO…..but the truth is that most Investors are not educated enough to understand the Difference between Value and Price…and with no Protection now that the CCI Formula for Pricing the Premium gave the Promoters and Merchant Bankers will create Hype and milk Investors…we all know the Reliance Power IPO Debacle…probably only Mukesh Ambani did not invest in this !…Kishore Biyani’s Future Capital,Tanti’s Suzlon were nothing but IPO Loot Pricing….Adani Group is simply another story ! …of Satyam is now well known !

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SEBI bans Austral Coke from raising Capital…was it sleeping when it allowed it to raise Capital through an IPO last year !?

It can’t be just a coincidence that this is my Blog Post No 420 !

Austral Coke came out with it’s controversial IPO in August 2008 in the price band Rs 164-Rs 196 for a FV Rs 10 share…The price was fixed at Rs 196 and it got listed on BSE on September 4,2008 rising to Rs 309,before closing at Rs 225…On October 28,2008 it dived below Rs 60 and since then has recovered to touch a high of Rs 570 last month before reacting ex split and post SEBI ban to Rs 48 today

The Company recently sub-divided the share into FV Rs 1 and it closed at Rs 48 today after SEBI banned it from raising capital…following disclosure by the Income Tax Authorities of Fradulent transactions of over Rs 1000 crs !

SEBI should have investigated it more last year before permitting the Company to raise Capital through an IPO.I had blogged this controversial IPO on August 8,2008 commenting that SEBI should have then itself verified claims of the Company on it’s capacities that were contested by Gujarat NRE Coke

Austral Coke went on to raise Capital in the IPO and it has now been also accused of diverting the proceeds too.

SEBI needs to get real serious about it’s prime objective of Investor Protection without fear or favour and probe Insider Trading more stringently

Expect the share price to fall further from Rs 48…if it does not then you know it’s being supported artificially by the company

If you hold the share,I would strongly advice you to sell as Promoters’ credibility continues to be suspect..and regulatory and tax authorities will continue to have Austral Coke under a heavy scanner…….and if you are an IPO allottee you’re already sitting on over 100% long term  gains….Take them

We need Long Term Structured Option Contracts…need to LEAP into LEAPS

I was just wondering…..Currently there is so much volatility in all markets,be it Equity or Commodities…due to earnings uncertainties,anxieties about health of global economy and Financial Systems

Most Experts are advising to think Long Term…Naturally…3 Years + atleast

Then why is it that we have Derivative Contracts structured only for a maximum of Three Months… for Long Term,we need to roll them over and over and over and over again ?

It’s time that we introduce Long Term Option Contracts…This will enable me to take a call on the Markets or a particular Stock or Commodity for a period of One Year and more by investing merely a fraction of what I would have to now in Spot

For example If I felt the Markets would improve in the next two years,I could buy a Nifty Call at Strike price of 2750 (Current Level) that expires in 2011 at a Premium of ,let’s say,Rs 225…Assuming Contract lot is 50,the contract Value is Rs 137500 and I would have to pay Rs 11250 as premium…That is my Cost….I now have the right,but no obligation, to exercise this Call

So if ,let’s say,Nifty moves up and is at 4000,somewhere in mid 2010,I can square of my contract and sell the Call,at a premium of let’s say,Rs 1025 and profit by Rs 800 which aggregates to Rs 40000 on the contract…a return of 356 % in a year or so !

The above is a hypothetical example and it can be argued that Option Premiums may quote at much higher % levels in this volatility…The Nifty Call of Strike 2750 may not be quoted at 225…but more at 500 perhaps or even more !…that’s an 18% premium !   

Chicago Board Options Exchange (CBOE) has a registered product on these lines and they have trademarked it as LEAPS.It stands for Long Term Equity Anticipation Securities…This product is available in the form of Calls and Puts for 450 common stocks and Ten Indices and the Expiration Date can extend upto 39 months…In fact CBOE even has the VIX or the Volatility Index Options which is the market estimate of expected volatility and is which is computed from realtime  S & P 500 Index Option Bid/Ask quotes  

I believe the SEBI Advisory Committee for Derivatives has already suggested the introduction of Long Term Derivative Contracts…Why the delay in the Suggestion being adopted for Implementation ? The Operations Framework by Exchanges is already in place for Futures and Options so this should facilitate the Introduction of Long Term Expiration Contracts fairly easily  

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