Investor rush: They have to contend with scamsters too

The thing about scams (of the stock market kind in this case, but this applies to almost all scams) is that no one knows when one will break, leave alone the modus operandi of the perpetrator. Since there is a 'money' aspect to almost all scams, and since the said commodity doesn't grow on trees-if someone is to make money through illegal means, someone else has to lose it-most tend to come to light when the victims reconcile their books, usually in the months of March and April in India where most entities close their books of account on March 31. In some cases, the money part isn't very clear. In the IPO-allotment scam that is just coming to light there has been no real loss on anybody's part; a few retail investors have suffered an opportunity loss (their chances of allotment were reduced by the fact that certain individuals made multiple applications). It is evident that this wouldn't have been possible without a. financiers willing to fund the people with multiple demat accounts which are a must these days for any stock market transaction (financiers because, it is unlikely that the fronts, the people making multiple applications are doing so on their own volition, their chances of being caught being the highest; and financiers because, given the previous observation, it is unlikely they have the money to pay for all those shares), b. depository participants (DPs), the companies that manage demat accounts, without whose involvement it would have been impossible for the fronts to open as many demat accounts as they did, c. banks (some banks are also DPs) that also financed the entire process in some cases, d. merchant bankers whose primary objective is to ensure that the issue is a success and who are willing to look the other way as far as the multiple-account phenomenon is concerned and e. registrars that are actually the entities that are responsible for ensuring that multiple applications are weeded out. At every stage of the allotment process, it is now becoming clear, there should have been checks that were not there. The good news is, the possibility of one individual moving the market, as the late Harshad Mehta did, and as Ketan Parkeh did, is as close to zero as can be. The bad news is, much of this seems to have happened because everyone (read: Foreign Institutional Investors, FIIs) of all hues wants a piece of the great Indian story. Unfortunately, India's market regulator hasn't evolved a method to investigate every conspiracy-theorist's favourite allegation, that most of the FII money flowing into the country is that of Indian corporates that are using the ongoing bull-run as an opportunity to bring back money stashed overseas. And, as the IPO-allotment scam shows, the market regulator hasn't acquired the skills it takes to stay one step ahead of scamsters.

Conscious Conscience

A Mill in Mumbai: Discounted land spins profits and how

Imagine this wholly hypothetical situation: 50, maybe 75 years ago, City A allots land at a discounted rate (or sells it, or leases it out) to Company B to run a certain business. The business runs into trouble today, say, because India's competitiveness as a country in that erodes over time and in the face of competition. B, meanwhile discovers that the price of the land it is on has appreciated significantly, and its promoter realises that if he can manage to convince the government that B be allowed to sell or develop the land and invest the proceeds in the stock market which, coincidentally, is on a roll, the returns would far exceed that from any other line of business. Now, the thing is this. The situation isn't entirely hypothetical; it pretty much sums up what happened to Mumbai's mills and it could well be the story of India's it industry (although no one would want India's competitiveness in it and it enabled services to erode, worse things have been known to happen to company's entire industries, and economies over time). While the government should review the way it acquires and allots land to ensure that the process is always focussed on the greater common good, the it companies themselves would do well to simply stop lobbying (or asking) for free- or cheap-land and start buying from the open market. These are companies that are transparent about their financials, are better governed (and boast better boards) than most companies in other sectors, and which can, most importantly afford to pay market-rates for anything they need to buy, be it the talent they require to run their business or land. In many ways, India Inc learnt how to be fair to its employees from the it firms that set the trend in terms of employee compensation (stock options, variable pay, and the like) and workplace aesthetics (although it can be argued that much of this was forced by market dynamics). And several of India's it millionaires have taken the phenomenon of corporate philanthropy to a new level. Somehow, this industry doesn't fit into the handout-culture that is manifest in the phenomenon of land allotments.

That Foot-in-Mouth Thing

Arjun Singh: Interference on his mind

It may be something in the water or air in the HRD Ministry. Then, given the incumbent minister's preference for working from home, it may not. Still, in keeping with what must surely be an unwritten commandment about HRD ministers making fools of themselves over something to do with the Indian Institutes of Management (IIMs), the current minister Arjun Singh was caught famously commenting that the Indian Institute of Management, Bangalore couldn't set up a campus in Singapore because there was local demand (for its programmes) yet to be met. Not too long after that, he modified his response, stating that the school would have to amend its articles of association before it went 'global', which process, the school has since embarked on. That sounds pretty much like a bureaucrat's way of looking at things and chances are some senior bureaucrat at the ministry suggested that Singh offer this safe sound-bite to make up for his earlier gaffe. Going by the logic (if the word can be used) of Singh's first comment, no Indian company should try and cater to the global market, not with the significant demand (latent or unmet) for its products or services back home. If Singh's they-have-to-meet-local-demand statement was a slip (and a 75-year old who isn't exactly in the best physical health can slip) it is condonable. If it wasn't, however, it reflects the same IIMs-are-part-of-the-government philosophy that former HRD Minister Murli Manohar Joshi's spat with the Indian Institute of Management, Ahmedabad (the ostensible reason for the spat was the minister's diktat that the school lower its tuition fee; the real issue was autonomy) highlighted. This magazine would like to, just for argument's sake, use the same logic as Mr Singh to ask him just one question: Given the government's abysmal record in primary education, should it even run institutes of higher education such as the Indian Institutes of Technology (IITs) and the IIMs? Wouldn't it make sense to privatise these schools?