IFCI Snafu

It's all badly fucked up at IFCI.

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If I were the FM, I would say this to IFCI management -- "Get that sand out of your cracks, guys. This stuff is hard work, now don't botch this up".... You should see the muck that gets raked over by our guys at IFCI that screwed up the Sterlite-Morgan deal. Let me put it this way. Some of its Board members aren't going to see such cushy jobs ever again. Too many perks for running a company aground. Then the government steps in with some concessions. As if by godsend, the real estate market too turned hot and suddenly the textile mills and other companies owning large swathes of land or belonging to sectors in the limelight (a la steel and cement) in IFCI's long NPA list became highly valued - by default. Now the jokers in IFCI board want to claim credit for turning it around when in fact, all they did was to try and turn it upside down – something that they almost accomplished. Someone in IFCI told me these guys pop a Viagra a day even to get up and walk straight....

Now they also want private investors to buy 26% but can’t let go off management control. If you add in the additional 20% public offer the investor will have to make, the new investor will end up holding 46% stake in the company for just 25% of management control (just two out of eight board seats) and no rights to appoint CEO. Now who will agree to that?

IFCI stock had lost 23% in the markets on Thursday. What if it were a Private sector management that announced the deal, named the bidder the day before and screws it up the next morning…? SEBI will be all over them for misleading investors for talking up and spooking the market intentionally.

Next time IFCI has a suitor, I suggest go put shock collars around its management. If they try to act up, they get through the invisible fence -- boom. Unconscious. They wake up in some casualty ward, never to be back at their desks again.

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CCI - another legless joke?

Ok. So the Competition Act is here.

The Act says any company with assets of Rs 10 billion ($253 M) or more and a turnover of Rs 30 billion ($759 M) or more has to seek CCI approval for any “combination” (merger, acquisition or amalgamation) within 30 days of signing the deal.

Any company of a smaller size that belongs to a group with assets of Rs 40 billion ($1 billion) or a turnover of Rs 120 billion ( $3 billion) will have to go through the same process if it decides on an M&A.

Given that there are about 341 companies exceeding that asset limit and 106 companies meeting the sales cut-off, imagine the kind of paperwork that it implies ! What will CCI make of it all? Going through the pile of papers in itself will take months, then it has to digest and debate it internally before giving its verdict. What kind of database it has to make an informed judgment on whether a particular transaction will result in market dominance or will smother competition? Rely on the data provided by the applicant? Has it got another choice?

To me, it sounds like a charade. If you are serious about promoting competition and destroying anti-competitive moves by the big players that seek to consolidate, first establish a reliable network of market intelligence and set up a database. I don’t mean people coming on deputation from Ministry of Law, Justice and Company Affairs or Ministry of Commerce or retired judges sticking their legs into the grave. They will infect it with the bribe culture – the only thing they did all their lives. Those are couch potatoes. Hire CEO material, real caliber, people with stuff. Pay them well. Sniff out monopolies even if they exist by any other name or in splinter, disparate groups. When you find one, bring them to book, break it up. That’s how you control monopolies.

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