G.N. Bajpai: Firm footing?

The buzz on the street is that the new Securities and Exchange Board of India (SEBI) chief Ghyanendra Nath Bajpai-maybe it's time people stopped using that adjective; he's been in office close to 100 days-is miffed at not being part of the latest scam to rock the Indian financial firmament. Wicked, wicked, wicked. Still, it is a bit unusual to have a scam and not have SEBI play a part in it. Much like this magazine's cover, l'affaire Home Trade has captured the imagination of headline-writers everywhere. The central character in the story of the financial services dotcom and government securities is the co-operative bank. And Reserve Bank of India (RBI) and the registrars of the co-operatives of the states where the banks are based are the regulators accused of oversight and inaction. Not SEBI.

	The Glass Ceiling In Numbers
	A Problem Of Plenty
	Corner-Room Models
	Of Compliance And Competitiveness
	Q&A: Donald H. Layton
	A Market Weathervane

The 59-year-old Bajpai, previously the Chairman of Life Insurance Corporation, is taking no chances. The investigations department of the regulator has sought information from the stock exchanges on brokers who have been active this past six months. SEBI has also ordered a separate investigation into Home Trade and released a list of entities-KSC Securities, Gilt Edge Credit Capital, Gilt Edge Equi-Derivatives, Gilt Edge Investment Banking, and Gilt Edge Portfolio Management Services, all controlled by the other Ketan, Sheth-that shall not trade in the securities market.

That pro-activity is just what one would have expected of Bajpai. When he took charge at SEBI on February 21 he said his primary task was to bring investors back to the primary market. On May 31, he completes 100 days in office, days spent at SEBI's Mittal Court premises in South Mumbai-when he is not travelling, as he was when this article was being written; to Istanbul, no less-meeting industry heavyweights, investor-associations, and the media, all part of an exercise to understand what brand of regulation would ensure universal satisfaction. On customer friendliness alone, Bajpai merits an A.

The chairman was not available to comment on the exact steps he would take to ensure the markets remained safe for investors. Like others before him, Bajpai would probably like more powers. Today, SEBI exercises its power under Section 11b of the SEBI Act, which enables it to issue 'directives' in the interest of investors. That's it, directives. Not many of the regulator's orders go unchallenged. As recently as October 2001, a SEBI order against Sterlite (See Mehta's Second Coming: 1998) was set aside by a Special Appellate Tribunal. There is the Justice Dhanuka report-it recommended strengthening SEBI-pending with the Finance Ministry since November 1998. If implemented, it will enable SEBI to carry out investigations and pass orders in much the same way the Department Of Company Affairs (DCA) does. It can search. It can seize. And it can teach those rogue companies a thing or two. Today, those powers are vested with the DCA, which is not keen to give them up to the regulator despite a proposal from the finance ministry to that effect. Bajpai can consider himself unlucky to be caught in a turf war between the ministry of finance and that of law, justice, and company affairs.

A stronger regulator will help but not nearly as much as a clearer regulatory framework and an action-plan to reform the notoriously venal Indian stockmarket system. On that front, there's been little noise. Still, let's render a quite thank you to providence for ensuring that the first financial scam of Bajpai's reign falls outside the purview of SEBI.

-Roshni Jayakar

ENDANGERED SPECIES
The Glass Ceiling In Numbers
Oops! A quick BT survey on the proportion of senior women execs in India Inc.'s finest throws up an expected, yet shocking, finding: there simply aren't enough women managers.

Company Total number of senior managerial positions Number of women in senior managerial positions ONGC 100 1 Wipro 135 10 Indian Oil 147 Nil ITC 50 Nil Ranbaxy NA 6 HPCL 55 1

No one expects the corridors of power at India's largest corporations to be teeming with women execs. Still, nothing prepared this correspondent for the results of a quick, statistically unrepresentative exercise aimed at simply arriving at the proportion of women holding down senior positions in India's largest corporations. The definition of 'senior position'? Anyone with a business card that says general manager upwards. Some companies refused to participate, others did (and we then wished they hadn't participated). Sum up: Wipro, with around one senior woman exec for every 13 men comes out tops. Of the rest, we'd prefer to say as little as possible. Oh yes, we promise to conduct this exercise every year.

-Abha Bakaya

FOR-EXCESS
A Problem Of Plenty
What India could do with its burgeoning forex reserves. Hint: Not much.

Fifty-five billion dollars (Rs 26,675 crore) and counting; 11 per cent of India GDP; and sufficient to finance an entire year's import bill. That's what the counter on India's forex reserves says, and it is a far cry from the frightening summer of 1990-91 when reserves could cover a mere three weeks of imports and the government had to resort to selling the family jewels (read: gold) to pay some debts. The central bank's stance is that this magnitude of reserves is imperative. ''We hold the view that $55 billion in reserves will help cushion the balance of payments from external shocks and help us meet our future external obligations,'' explains Reserve Bank of India Deputy Governor Y.V. Reddy. There's no arguing that logic. Still, there's a growing feeling among economists and general know-it-alls that the reserve can be put to better use. That doesn't mean it can be used to reduce the fiscal deficit-it can't-which has now risen to around 5.7 per cent of GDP. However, it can be used to prepay part of India's $100.38 billion (Rs 48,684 crore) external debt. India earns a mere 2-3 per cent on the reserves, but pays between 8-9 per cent interest on foreign loans. Maybe it is time to burn some of that $55 billion.

-Ashish Gupta

POWER DRESSING
Corner-Room Models
India's best-known designers pick the CEOs they consider best dressed.

Anil Ambani: The topper

Preeti Paul: An eye for clothes

Sunil Mittal: The right cut

Steve jobs has his customary black turtleneck, chosen, reports go, many years ago to help him save time deciding what to wear; Larry Ellison, his Italian-cut suits (preferably black or charcoal grey); and Sanford Weill, his understated banker-chic. Just for kicks, we decided to ask designers Ritu Beri, J.J. Valaya, Rohit Bal, Jattinn Kochhar, and Rina Dhaka, and stylist Prasad Bidappa to pick India's best-dressed corner-room occupants. Most Indian CEOs wear the traditional dark two-piece suit, so the task wasn't easy. Our panel looked for the kind of people Kochhar describes as, ''using their clothes to make a subtle statement.'' Adds Valaya, ''You need a touch of flamboyance.''

You sure won't see them on the ramp, but here goes.

Anil Ambani: The man who figures in the most lists (three). ''He wears smart clothes, is elegantly turned out, and is slim, fit, and handsome,'' says Bal.

Sunil Mittal: Like his company, his clothes are making all the right moves. ''His suits are cut to fit him perfectly,'' raves Kochhar. ''They are just the right shade of grey and tell you something about his personality.''

Vijay Mallya: The larger than life Mallya was bound to find a presence in this short-list. ''He makes a big statement with his clothes and has fantastic accessories, especially watches,'' says Bidappa.

Preeti Paul: The only woman in our listing, may her tribe increase. ''She wears fashion the right way,'' gushes Dhaka. ''She has a good eye (for clothes), a good figure, which is an advantage, and a great sense of style.''

Other CEOs mentioned included P.R.S. Oberoi, Gautam Thapar, Anil Nanda, Hari Bhartia, Adi Godrej, Mukul Kasliwal, K.M Birla, and Mickey Punj. None, alas, is partial to a black turtleneck.

-Abha Bakaya

INTRACTABILITY
Of Compliance And Competitiveness
Unless garment exporters become socially accountable their competitiveness could suffer.

Changing attitudes: Garment exports may come under cloud

Social accountability, what's that? Indian garment exporters could have gotten away with such a response some time back. Now, with the impending end of the quota regime (to put it simply, this decided the ceiling on a country's exports) in garments half the existing factories in the world face the threat of extinction.

The first to go will be the ones that do not match global compliance norms. ''Factories will have to be competitive in price, quality, capacity, delivery, human rights, and social accountability,'' says Rajesh Chhabara, CEO, CSR World, and the former head of compliance for Gap Inc in the Indian sub-continent. ''Many factories are going to lose out on the grounds of social accountability.''

CSR is targeting the 30,000-odd garment factories in India that together account for $4 billion (Rs 19,200 crore) of exports. It's pitch: it can help turn social accountability into a competitive advantage. That won't be easy. For instance, most units will have to install a treatment plant in their washing units to remove chemicals that could otherwise harm workers. The cost: Rs 15-20 lakh. This investment will have to be done in a context where prices are on a downward spiral, buyers expect every lot to be of better quality than the previous one, and the inexorable grind to improve productivity. Predictably, only the strong shall survive.

Size-the average export-oriented garment factory in India boasts 150-200 machines as against 500-1,000 in Bangladesh and Sri Lanka-could prevent Indian exporters from making the requisite investments. Then there is attitude. ''Sri Lanka and Bangladesh are far more contemporary,'' explains Chhabara. Those could more than offset India's natural advantages: a skilled workforce and the fact that it grows its own cotton. Still as Chhabara concludes, ''at least people are talking about these issues; five years ago, we couldn't even expect that.''

-Abha Bakaya

Q&A
"Our Focus Is On Large Indian Cos"

Donald H. Layton: Cautious optimism

Donald H. Layton, the co-CEO of investment bank JP Morgan, was in Mumbai recently and met with BT's Roshni Jayakar. Excerpts from the interview.

The big two in the investment banking business in India are clearly DSP Merrill Lynch and JM Morgan Stanley. How do you see JP Morgan going up the league table?

First, I think it important to say that our main objective is not to look good on league tables. Instead, good league table positions should be the result of great deals for clients creating a superior market position.

In the case of India, our focus is much more selective. We are only looking to do business with the largest Indian corporates and financial institutions.

The buzz is that you plan to bring your entire back-office operations to India...

We already have a small operation in place in Mumbai, and we have an internal proposal to expand it.

Against the backdrop of investigations into analysts issuing misleading stock ratings because of investment banking relationship with companies they analyse, what, in your opinion, would be the right model for investment banking?

The industry is now changing its model for doing research, and in this case, we really mean equity research. I do not pretend to know where it will all end up, although my personal opinion is that some of the more radical proposals for an equity research (centric) business model are unlikely to be adopted.

What are the trends driving the investment banking business today?

Let me name four highlights.

Better Capitalisation: Except for some boutiques, the industry is consolidating into better capitalised players.

Broader Product Range: The consolidation is also producing players with a broader product range. Executed well, you can clearly be a better banker to your clients if you have more products.

Cross-border emphasis: Just as international trade grows faster than GDP globally, cross-border banking transactions grow faster than the domestic banking business. This means that more firms will be global and regional, rather than just national.

Deregulation: The modern investment banking industry was revolutionised by the securities and commercial banking deregulation that occurred in major markets such as the US and the UK two or more decades ago. I expect this trend to continue with less intrusive regulation that, while protecting public interest, allows the industry to grow, prosper and innovate.

A MARKET WEATHERVANE

Should investors reach for their umbrellas? A BT take on the weather on the bourses for the next quarter.

THE ECONOMY
Current conditions: Partly cloudy
The Centre for Monitoring Indian Economy (CMIE) has estimated GDP growth for 2002-03 at 4.5 per cent. And the fiscal situation is likely to worsen.

MARKET MOVERS
Current conditions: Overcast
An analysis of daily flows from foreign institutional investors (FIIs) and mutual funds throws up a surprising finding: there are no buyers.

INTANGIBLES
Current conditions: Stormy
Numbers are an important part of evaluating the market. Still, investors can't overlook the unpredictable acts than can set the market on a downward slope. Like the Home Trade scam. Or the threat of a war with our neighbour.

STOCK VALUATIONS
Current conditions: Sunny
The 30 stocks in the Sensex have a price-earnings (PE) multiple of 13.29 and the 50 stocks in the Nifty, 14.17. That's great value-for-money valuation; only, as we mentioned earlier, there are few buyers.

-Roshni Jayakar