Author: CP

The stock hit a low of Rs 359 and a high of Rs 414.80. Exchanges have set Rs 407 as base price for the scrip with a 20% price band. A strong 11.1 lakh shares changed hands in the counter on BSE. Indiabulls Real Estate (IBREL) was formed following the demerger of the real estate business of Indiabulls Financial Services (IBFSL). The company was listed on the bourses today.

It may be recalled that as part of the demerger scheme of IBFSL, a share of IBREL was issued for every share held in IBFSL with 9 January 2007 as record date. Accordingly, trading in equity shares of IBFSL was done on ex-entitlement basis with effect from 2 January 2007. IBFSL stock had settled at Rs 659.65 on BSE on 29 December 2006, the last day when the stock was trading cum-entitlement basis (for allotment of IBREL shares). At the moment of writing this, IBFSL was hovering at Rs 364.

The total equity capital of IBREL is Rs 35.93 crore, consisting of 17.96 crore shares of Rs 2 each. Avoid all Real Estate stocks until further notice.

The finance ministry has ordered the recasting of the boards of all listed public-sector banks, cutting down the number of shareholder directors by 50% while raising the number of government appointed “independent” directors.

Extremely Bad Decision as the government’s grip on public-sector banks will increase.

In a related development, the government has also withdrawn its own directors as well as the Reserve Bank of India’s directors from the management committees of bank boards. This key board committee is responsible for clearing all big-ticket loans that cannot be cleared by the CEO of a bank. The loan-sanctioning power of the public-sector bank CEO is limited to Rs60 crore at small banks and Rs100 crore at big banks. This reminds me of the series of co-operative banks that went bankrupt in between late 90s and 2002 because of involvement of corrupt directors.

Bank CEOs, in private, say that while such nominees are technically independent professionals, in reality most of them are political appointments and normally belonging to the party in power. For instance, one so-called independent director who is set to join a large Mumbai-based bank is Rani Satish, the former minister of state for Kannada and Culture from the ruling Congress party.

“On what basis do I remove a shareholders’ nominee?” asks a visibly frustrated chairman of a very large public sector bank, who says the timing of the government decision is unfortunate because public-sector banks need more outside expertise at a time when they are trying to compete more aggressively with private banks that can attract a more diverse board.

The terrible decision by government to recast public sector bank boards does not technically abide by the capital market regulator’s norms on independent directors on the boards of listed entities. In accordance with Clause 49 of the listing norms, all listed corporations should have 50% independent directors on their boards.

Hopefully the rating agencies like Fitch and Moody’s will downgrade India to RISKY category.