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An Overview of the Indian Stock Market

with Emphasis on Ownership Pattern of Listed Companies*

K.S. Chalapati Rao

Although audit is the most pressing area for change, it is not the only one. The
Enron fiasco has shown that all is not well with the governance of many big
American companies. Over the years all sorts of checks and balances have been
created to ensure that company bosses, who supposedly act as agents for shareholders,
their principals, actually do so. Yet the cult of the all-powerful chief executive, armed
with sackfulls of stock options, has too often pushed such checks aside.
It is time for another effort to realign the system to function more in shareholders’
interests. Companies need stronger non-executive directors, paid enough to devote
proper attention to the job; genuinely independent audit and remuneration
committees; more powerful internal auditors; and a separation of the jobs of chairman
and chief executive. If corporate America cannot deliver better governance, as well as
better audit, it will have only itself to blame when the public backlash proves both
fierce and unpleasant.

The above is an assessment and warning by The Economist in the context of

the collapse of Enron, placed 5th in the latest Fortune 500 rankings of American
companies. A number of other disclosures including that of Tyco International,
Adelphia Communications, Computer Associates, Qwest Communications, Global
Crossing and now WorldCom further deepened the scepticism about the state of
affairs in corporate America. Managements, auditors and intermediaries are under
the scanner. According to Fortune, Arthur Levitt, former head of the US Securities
and Exchange Commission (SEC), said: "America's investors have been ripped off as
massively as a bank being held up by a guy with a gun and mask." A SEC press
release in the wake of WorldCom disclosure that the company had overstated cash
flow by US$4 billion stated: “The WorldCom disclosures confirm that accounting
improprieties of unprecedented magnitude have been committed in the public
markets”. Close on the heels of WorldCom, Xerox, which had already been fined
once before for improper accounting, announced possible scaling down of profits by
US$2 billion.
Obviously, in spite of the long experience with managing the stock markets,
not all is well with the role model for the developing country stock markets. Almost
a decade earlier, it required a Cadbury to tell the world that British company boards
act as old boy net works and cosy clubs and to emphasise the importance of audit.
Incidentally, this was the time when India embarked upon the path of accelerated
liberalisation. Since then, development of the capital market has been an integral
part of India’s economic restructuring strategy. The Economic Survey 1992-93
observed that the process of reforms in the capital market
… needs to be deepened to bring about speedier conclusion of transactions,
greater transparency in operations, improved services to investors, and
greater investor protection while at the same time encouraging corporate sector
to raise resources directly from the market on an increasing scale. Major
modernisation of the stock exchanges to bring them in line with world

* Published as “Stock Market” in Alternative Survey Group, Alternative Economic Survey: 2001-2002, 2002.

standards in terms of transparency and reliability is also necessary if foreign
capital is to be attracted on any significant scale. (emphasis added)

The past ten years are witness to many changes in line with this objective. Trading
and settlement procedures have been improved. New instruments have been
introduced. Disclosure levels have been enhanced. Measures to protect investors’
interest and educate them have been initiated at least on paper. A code of corporate
governance has been put in place. Steps were initiated to change the organisational
structure of the stock exchanges. Notwithstanding these improvements, the
experience leaves one wondering how far the heavy emphasis placed on the stock
market for allocating resources is justified.

Mobilising Resources from the Capital Market

The initial euphoria created by liberalisation and scam-induced spurt in share
prices helped mobilisation of large amount of resources from the market. Far from
raising resources directly from the investors, companies, for the past few years have
been, however, resorting to private placements and borrowings (Table-I).
Households on their part have been denouncing corporate securities (Table-II). The
primary market is practically dry (Table-III). There was, however, a brief upswing in
2000 when the so-called new economy stocks flooded the market with many issues of
dubious quality. On the other hand, relative importance of assistance disbursed by
financial institutions increased substantially (Table-III, Col. 6).

Mobilisation of Resources: Increasing Share of Private Placements

Year Total Of which, Share of Private

Domestic Private Placements in Total
Issues Placement (%)
(Rs. Crores) (Rs. Crores)

(1) (2) (3) (4)

1990-91 14,219 4,244 29.85
1991-92 16,366 4,463 27.27
1992-93 23,286 1,635 7.02
1993-94 37,044 7,466 20.15
1994-95 41,974 11,174 26.62
1995-96 36,193 13,361 36.92
1996-97 33,872 15,066 44.48
1997-98 37,738 30,099 79.76
1998-99 59,044 49,679 84.14
1999-00 68,963 61,259 88.83
2000-01 73,922 67,500 91.31
Source: National Stock Exchange, Indian Securities Market: A Review, Vol. IV, 2001.

Thus, as things stand today, one hardly sees any evidence of the corporate
sector raising resources directly from the market on an increasing scale. While the stock
market has receded, the financial intermediaries staged a comeback during the
second half of the 1990s (Table-IV). Compared to the initial days of liberalisation,
now there does seem to be a better recognition of the need for financial
intermediation. RBI in its Currency and Finance: 2001, observed that:

On balance, it is desirable to have a diversified and balanced financial system
where both financial intermediaries and financial markets play important
roles in imparting greater competitiveness and efficiency to the financial
system. In the present context of financial liberalisation, stock markets and
banks emerge as sources of corporate finance and stock market development
actually tends to increase the quantity of bank loans through improved debt-
equity ratios. Thus, the coexistence of both systems is socially desirable not
only because it encourages competition, but also because it reduces
transaction costs within the financial system, and helps improve resource
allocation within the economy.

Shares of Select Items in Changes in Financial Assets of the Household Sector

Year Changes in Percentage Share in (2) of @

Assets Bank Deposits, Life Non-Bank Stocks, UTI Units
(Rs. Crores) Insurance, Deposits Debentures and
Provident & Units of Mutual
Pension Fund and Funds
Claims on
(1) (2) (3) (4) (5) (6)
1990-91 58,908 73.70 2.18 8.44 5.84
1991-92 68,045 62.01 3.26 9.99 13.35
1992-93 80,354 68.85 7.51 10.22 6.98
1993-94 1,09,618 64.79 10.63 9.18 4.29
1994-95 1,45,501 69.96 7.94 9.26 2.69
1995-96 1,24,338 68.98 10.61 7.11 0.21
1996-97 1,58,518 68.88 16.39 4.18 2.38
1997-98 1,71,740 86.14 3.92 2.60 0.35
1998-99 2,09,664 82.83 3.65 2.68 0.90
1999-00 2,44,143 82.97 2.60 5.61 0.74
2000-01 2,64,699 87.87 3.39 3.24 -0.51
Source: Reserve Bank of India.
Note: @ Other investments are not shown here. Hence percentages in Cols. (3) to (6) do not add up to 100.

New Capital Issues by Non-Government Public Limited Companies
and Assistance Disbursed by Financial Institutions

Year Total Of which, Ratio of (5) to

Ordinary Shares Assistance
Number Amount Number Amount Share Premium Disbursed by
of Issues (Rs. Cr.) of Issues (Rs. Cr.) included in (5) Financial
Institutions (%)
(1) (2) (3) (4) (5) (6) (7)
1990-91 364 4,312.2 246 1,284.3 127.9 33.66
1991-92 517 5,756.8 368 1,731.3 227.5 38.09
1992-93 1,040 19,803.4 868 9,952.6 5,184.1 85.54
1993-94 1,133 19,330.3 983 9,959.7 4,464.9 72.60
1994-95 1,678 26,416.7 1,548 17,414.4 8,430.8 78.70
1995-96 1,670 16,117.5 1,598 11,997.3 4,856.4 41.39
1996-97 842 10,424.1 805 6,116.0 1,462.1 24.40
1997-98 102 3,138.3 89 1,162.4 653.5 5.85
1998-99 P 48 5,013.1 33 2,562.7 1,325.8 8.59
1999-00 P 79 5,153.3 69 2,752.5 2,169.3 7.51
2000-01 P 145 4,948.9 134 2,666.5 1,267.3 6.86
2001-02 (Apr-Jan) 15 3,964.5 5 859.5 N.A. N.A.
Source: Col. (1) to (6) are based on RBI data and Col. (7) on NSE, Indian Stock Market: A Review, Vol. IV, 2001.
N.A. =Not Available.

Table -IV
Financing of Non-Government Non-Financial Public Limited Companies by Financial
Intermediaries vis-a-vis Capital Market
(Percentage share in total share of funds)
Category 1985-86 to 1990-91 to 1995-96 to
1989-90 1994-95 1999-2000
1 2 3 4
i) Capital Market 18.2 26.0 19.0
(Debentures + Paid-up Capital)
ii) Financial Intermediaries 22.2 18.5 20.2
(Banks and FIs)
Source: Reserve Bank of India.

Hasty Liberalisation?
The decision to increase the role of stock market was taken, as a part of the
‘shock therapy’, without adequate preparation or understanding of the behaviour of
the financial sector and of the major players -- intermediaries, promoters, investors
and the regulators – in a country like India, and even ignoring the experience of the
1980s when initially the stock market was given a major push. The gates were
thrown wide open as it were. Result: a series of scams of varying gravity with the
regulators getting the blame for inexperience, laxity and lacking in proactive
approach. Instead of trying to address the problems, those in authority often sought
to shift the responsibility onto one another. Investigations have been long drawn
and even when actions were taken, they were turned down by the appellate
authority. There are comments galore at the serious problems of insider-trading and
price manipulations.
The first major scam was perpetrated by Harshad Mehta. The diversion of
funds from the banking system led to zooming of share prices to unprecedented
levels within a span of three months (Jan-Mar 1992) during which time the BSE

Sensitive Index (Sensex) more than doubled from about 2,000 to 4,400. This gave rise
to a false impression of the windfall gains that could be had from the stock market
and created a `herd’ mentality. During the boom period, shares of even loss-making
companies commanded high premium. Another major scandal of the initial period
was the promoters, especially MNCs, issuing themselves preferential shares at prices
far lower than the then prevailing market prices.
Apart from the doubtful quality of many of the new issues, an important case
which shook the markets in early 1995 was the Rs. 350 crore Fully Convertible
Debentures (FCD) issue of M.S. Shoes. The company was accused of inadequate
disclosures. Taking advantage of free pricing of issues, many companies charged
high premium. But the post-listing returns proved to be disappointing. In the post-
liberalisation period a good number of companies were not only non-manufacturing
ones, but the purpose of issue also varied from project finance to working capital. In
terms of numbers, about one-third of the issues were by financial companies with a
preponderance of non-banking financial companies (NBFCs). A number of public
issues were made without any critical scrutiny.
The Reliance share switching scandal, gross disappointment with Morgan
Stanley’s Mutual Fund issue, misdemeanors of the so-called plantation companies
and the turbulence in the NBFCs with the CRB group in the vanguard hurt the
secondary market and further eroded investors’ trust in the stock market. Primary
market scam of the mid-1990s, an important one in this sequence, which meant
unscrupulous fly-by-night promoters made good with public money and some of
them even ‘vanished’ after collecting funds from the public, severely shook the
confidence of the individual investors. In addition, communal disturbances -- the
latest being the Gujarat carnage, war fears, East Asian financial crisis, sanctions
following nuclear tests, UTI’s US-64 troubles, etc. further contributed to the
difficulties by periodically depressing the market.
Based on a SEBI-NCAER survey which found 80 per cent of equity investor
households to be first generation investors and majority of equity-owning
households having an inadequate diversification of portfolio – only about 5 per cent
invested in more than 5 companies, the National Stock Exchange (NSE) concluded
that the households lacked “experience of stock market operations”. About 84 per
cent of the households invested in equity shares through the primary market – in the
all-enveloping euphoria investors probably flocked to new issues to make quick
money rather than making informed long term investments. These observations
show the unsuitability of shock therapy which took the form of sudden switching
over to free pricing of issues on the one hand and removing entry restrictions on the
other. This enabled many non-serious and fraudulent promoters to take advantage of
the policy vacuum. Obviously, the experience proved quite costly both for the
investors and the economy.
Of late, newspapers have been projecting revival of the primary market with
a number of IPOs during the second half of this year. Tata Consultancy Services
(TCS) is expected to lead the pack and raise between Rs. 4,000-5,000 crores.
Enthusiasm is being whipped up by the financial press to attract the individual
investor back to the market. Apart from many other questions, some of which we
shall address a little later, given the kind of shocks the Indian stock market is prone,
how long would the good feeling last? Many a time the market fell steeply not only
because of scams and other economic factors but also due to political, communal,
defence, terrorism – national and international – factors. The public issues that are
in the pipeline would definitely seek a high premium. Given the circumstances of
India, who can guarantee that there won’t be another scam or a major adverse event

that would trigger a fall and wipe out all the gains and bring the market back to
square one?
An equally important point is how the funds mobilised/owned by the
companies are being utilised. In a study conducted at the ISID it was noticed that
companies of different sizes extended loans to or invested in other enterprises in a
big way. Such phenomenon is more prevalent in profit-making companies. Within
the profit-making companies those who increased their borrowings invested
relatively more than the rest. There is growing importance of group companies and
non-marketable securities as also advances to group companies in such outside
investments. The average returns from such investments, were, however, lower than
the average interest rate paid out by the companies. The main purpose of the
investments, therefore, appears to be acquiring/retaining/strengthening control over
other (as also group) companies rather than getting better financial returns from such
investments. Once loans and investments are made, directors and shareholders of
the investing company would have no further control over the utilisation of funds.
Resorting to heavy outside investments and advancing of loans out of borrowed
funds increases not only the cost of funds for the investing company but also exposes
the company to default risk.
It is important to note from press reports that the government is setting up a
Central Listing Authority (CLA) which would oversee issues and listing at the stock
exchanges and monitor use of issue proceeds. This only means that the Capital Issue
Control which was abolished in the wake of liberalization would be making a
comeback albeit with a different name and scope. This should be construed as an
acknowledgement of the misuse of the freedom by corporates and the
intermediaries. It is also being reported that norms for inter-corporate investments
and loans, which were relaxed in the new regime, may be tightened again to prevent
misuse of subsidiaries and other companies to route funds into the stock market.

The basic purpose of stock market is to provide capital for investment and for
the investors liquidity. The need for such capital is expected to increases with size of
the enterprise. For large companies to emerge and function effectively, there is a
need to pool risk capital which individual entrepreneurs cannot bring in on their
own or with the help of relatives, friends and acquaintances. What is the position
that is emerging now? Who own listed companies or, alternatively who provide the
risk capital: promoters, intermediaries (broadly defined to include a variety of
financial institutions), or individuals who are the focus of many a debate on the stock
market (the endeavour has been to bring the small investor back to the market) and
from whom resources were to be collected directly?
Compared to the earlier period, in the new regime, a few factors are expected
to influence the shareholding pattern.
(i) It is well known that many large private sector companies were being
controlled by the industrial Houses in spite of having small
shareholdings due to the support extended by public financial
institutions. These managements faced a severe threat of losing
control, especially to foreign companies, following liberalisation of the
economy. In a tacit recognition of this fact, promoters have been
allowed to increase their stakes gradually without the obligation of
making an open offer to the other shareholders.

(ii) Companies have been allowed to buyback their shares in the process
of which the controlling interests increase their stakes without putting
their own money.
(iii) In a typical takeover case, due to open offer, controlling interests’
stake increases because on top of the shareholding acquired from the
existing promoters, the new promoters would have to make an open
offer to the remaining shareholders.
(iv) With the relaxation of limits on foreign direct investment (FDI) in
individual enterprises, listed affiliates of foreign companies tended to
acquire subsidiary status. Some of them have either got already
delisted or are on the verge of delisting.
(v) It was initially felt that the foreign institutional investors (FIIs) could
connive with foreign companies in taking over Indian companies.
Possibly due to such a perception, ceilings were introduced on overall
and individual FII shareholdings. The limits have been, however,
increased progressively. While there is a general ceiling of 24 per cent,
in individual cases companies can decide to raise the limit up to 49 per
cent. Early this year, sectoral caps for FDI have been made the limits
for FII investments as well.
(vi) Limits on inter-corporate investments have been liberalised thereby
enabling companies engage in a variety of inter-corporate
relationships, the simplest being cross-holding of shares. Cross-
holding obviates the need to mobilise additional resources by the
managements for strengthening control.
(vii) A conscious effort also has been made to promote mutual funds,
following again the US model that individual investors do not have
the time, knowledge and resources to make right investment choices
on the stock markets. Expert analysts of these funds are expected to
take informed investment decisions.
(viii) Convertibility clause whereby term lending institutions had the option
to convert certain portion of their loans into equity has been
(ix) As per the official guidelines, non-promoter shareholding can be as
low as 10 per cent. The ceiling was earlier 25 per cent.

Given these changes, it would be relevant to examine the present

shareholding pattern of listed companies. The crux of the issue is: who own
corporate India? What is the extent of shareholding of individual Indian investors
who actually represent the disintermediation phenomenon? What is the extent of
foreign portfolio investments which are a major focus of policy towards stock
market? How relevant are the ceilings placed on FII investments and how
widespread are these investments? How much inroads mutual funds could make?
Preliminary results of an ongoing study at the ISID of the shareholding pattern of
companies listed at the Stock Exchange, Mumbai (BSE) which has a large number of
companies listed, are presented in the following. While the shareholding data was
collected from the BSE Website, other relevant data has been put together from
different sources.
One of the ways of looking at the importance of different categories of
shareholders is through the total value of their investments at any given point of
time (called market capitalisation) instead of the nominal value of shares held by
them. This is measured as the product of number of shares multiplied by the

prevailing market price summed for all the listed companies. According to one
estimate, market capitalisation (MCAP) of listed companies on April 11, 2002 was Rs.
6,36,045 crores. The MCAP of 2,574 companies for which we could get the latest
shareholding data was Rs. 6,11,794 crores. That we could get the data of only a little
less than half of the companies listed at BSE may be an indication of the poor state
the remaining are in. The shareholding data refers in nearly 90 per cent of the cases
to March 2002, and in the remaining to December 2001.
Leaving aside the 67 listed public enterprises, in which the government
would in any case have a majority shareholding, market capitalisation of 2,507 non-
government listed companies for which shareholding data was available was Rs.
4,40,246 crores. From Table-V it can be seen that the promoters – both Indian and
foreign as also entities acting in concert with them – have already acquired nearly
half of the total market capitalisation. A closer look at the disclosures made to the
Exchange suggests that promoter shareholding could still be hidden in the form of
other corporate bodies, individual shareholders and NRI/OCBs. In one case, the
address of a ‘non-promoter’ corporate shareholder was that of the company’s
Chairman himself! Interestingly, a few large companies did not claim that there
were any promoters (e.g. ACC, BSES and ITC). In some of the extreme and large
cases we tried to reclassify the shareholdings of controlling interests appearing in
other categories. The exercise could not be conducted for all the companies due to
limitations of time as also lack of detailed information. If such holdings are also
taken into account it is likely that overall share of the promoters may well exceed
half. Promoters indeed are likely to keep certain of their entities out of the ambit for
a number of reasons. Apart from narrowing the scope of insider trading
investigations, one rationale could be that they would not gain anything by claiming
an investor to be associated with the promoter. In some circumstances, fights within
controlling families could be responsible for not naming certain entities as promoter
shareholdings. It is also possible that the narrowing of the definition of relatives
under the Companies Act gave the promoters flexibility to keep investments of close
relatives outside the promoter category. Keeping certain shareholdings out of the
promoter group also helps to ward off the threat of delisting.

Share of different Categories of Shareholders in Market Capitalisation

Category Market Capitalisation Share in Market

(Rs. Crores) Capitalisation of non-
government companies (%)
(1) (2) (3)
A Total Market Capitalisation (MCAP)# 6,36,045
B Of which, MCAP of 2,574 companies for
which shareholding data is available $ 6,11,794
C MCAP of 67 public enterprises (within B) 1,71,634
D MCAP of 2,507 Non-Government
Companies (B) - (C) 4,40,160 100.00
Composition of (D)
1) Indian and Foreign Promoters including
persons acting in concert with them 2,10,597 47.85
2) Institutional Investors 1,08,281 24.60
(a) Foreign Institutional Investors (FIIs) 53,741 12.21
(b) Banks & Financial Institutions 30,506 6.93
(c) Mutual Funds 24,033 5.46

3) General Public: Indian 79,086 17.97
4) Private Corporate bodies 17,582 3.99
5) Non-Resident Indians and Overseas
Corporate Bodies (OCBs) controlled by
them 6,997 1.59
6) Others (including GDRs) 17,617 4.00
# As per data accessed from on April 12, 2002.
$ MCAP was available for 2,055 companies.

In terms of numbers also, in roughly half of the companies, promoters have a

majority stake. The incidence of majority promoter ownership is more prevalent in
case of large companies with more than Rs. 50 crores market capitalisation (Table-
VI). Promoter’s stake, however, need not always be held by the promoters
themselves in their personal capacity. It could be provided by other companies
controlled by the group, some of which could be listed companies themselves. Such
investments while lessening the risk borne by the promoters enable them exercise
disproportionately greater control over the companies involved. The available data
does not facilitate a comprehensive examination of this phenomenon. A limited
analysis of the shareholding pattern of Tata House companies reveals that in a
majority of the cases, investments by other listed companies of the group and their
subsidiaries contributed significantly to the promoters’ stake. If the investments of
listed companies of the group in Tata Sons and Tata Industries, which in turn hold
stakes in many of the group’s listed companies, are also taken into account, the
group’s strategy of using listed companies’ money to bolster its control becomes
quite evident. At the end of 2000-01, the total cost of acquisition of shares in the two
apex companies by some of these listed companies was more than Rs. 400 crores.
Interestingly, while TELCO holds 4.68 per cent of equity of TISCO, TISCO in turn
holds 9.37 per cent of TELCO’s equity. The recent attempt by the group at making
VSNL invest in Tata Teleservices should not, therefore, surprise anyone.

Distribution of Companies according Promoters’ Stake

Promoters’ All Companies Companies having Rs. 50 crore or more

Shareholding of MCAP
(%) No of Per cent to No of Companies Per cent to Total
Companies Total
(1) (2) (3) (4) (5)
Less than 10 86 3.43 13 2.76
10 – 25 197 7.86 24 5.10
25-40 539 21.50 94 19.96
40 and up to 50 439 17.51 65 13.80
More than 50 and
up to 74 952 37.97 202 42.89
More than 74 294 11.73 73 15.50
Total 2,507 100.00 471 100.00

Distribution of Companies According the Share of General Public

General Public No of Companies Market Capitalisation (Rs. Cr.)

(%) In the Range Out of which Total Average (4)/(3)

(1) (2) (3) (4) (5)
Less than 10 253 170 5,646.90 33.22
10 – 25 745 642 50,020.57 77.91
25-40 763 642 18,272.79 28.46
40 and up to 50 357 273 3,150.97 11.54
More than 50 389 271 1,994.57 7.36
(Above 40 746 544 5,145.54 9.46)
Total 2,507 1,998 79,085.80 39.58

There are 1,761 companies (about 70 per cent of the total) in which
shareholding of the general public is less than 40 per cent of the total equity of the
respective companies (Table-VII). In the remaining 746 companies the share of
public was 40 per cent or more. In the context of disintermediation this is an
extremely relevant group and hence needs a closer look. Significant direct
shareholding of the public is thus limited to just about 30 per cent of the cases only.
An important feature of this group is that, going by the market capitalisation of the
companies for which MCAP is available, its constituents are quite small either
because they have a small capital base or their share prices are so low that the market
capitalisation turned out to be extremely small. While no trading took place in 139
cases, if the ones traded on less than 25 days (i.e., less than one-tenth of the total
number of days traded) are also taken into account, in close to half of the cases, there
is very little trading (Table-VIII). In contrast, companies with less than 40 per cent
public shareholding fared somewhat better. That the trading that had taken place in
the 746 companies could be nominal is evident from Table-VIII. In a little less than
half of the cases, there was nil trading or the total number of trades were fewer than
62 i.e., less than 1 trade in four days. In two-thirds of the cases, the average trades
per day were two or less. Once again, companies with lower share of outside
individual investors were somewhat in a better position. Thus, while there is lack of
liquidity in general, for the companies having relatively larger pubic shareholding, it
is even worse.

Distribution of companies according to number of trading days and
Extent of shareholding by the Indian Public

Companies with shareholding of General Indian Public

No. of days traded 40 per cent or more Less than 40 per cent
Cumulative Per Cumulative Per
No. of Cos. cent No. of Cos. cent
(1) (2) (3) (4) (5)
Not Traded at all 139 18.63 262 14.88
Less than 25 days 215 47.45 327 33.45
25 – 50 days 54 54.69 114 39.92
50 – 100 days 71 64.21 168 49.46
100 – 150 days 63 72.65 160 58.55
More than 150 days 204 100.00 730 100.00
All Companies 746 1761
Note: Total number of trading days – 247.

Distribution of companies according to number of trades and
the Extent of shareholding by the Indian Public

No. of Trades in Companies with shareholding of General Indian Public

247 days 40 per cent or more Less than 40 per cent
No. of Cos. Cumulative No. of Cos. Cumulative
Per cent Per cent
(1) (2) (3) (4) (5)

0 139 18.63 262 14.88

<62 225 48.79 332 33.73
62-125 39 54.02 85 38.56
125 - 250 43 59.79 106 44.58
250 - 500 51 66.62 125 51.68
500 - 1000 55 73.99 150 60.19
1000 - 2500 53 81.10 179 70.36
2500 –5000 40 86.46 134 77.97
5000 + 101 100.00 388 100.00
All Companies 746 1,761

It thus appears that the individual investors are stuck in companies whose
shares are hardly traded. They cannot get out even if they wish to because there are
no takers. The problem could be even more serious because many of the listed
companies whose shareholding data is not available are likely to be similarly placed.

Institutional Investors
Next in importance is the broad category of institutional shareholdings which
amounted to close to one-fourth of the total MCAP (Table-V). Within this, FIIs are
the most important category followed by banks and financial institutions and mutual
funds (MFs). Out of the 2,574 companies, FIIs had a presence in 633 companies
(Table-X). However, in as many as 340 cases FII holdings were less than 1 per cent of
the total shareholding of the respective companies. Given the possibility that some
of the FII investments could as well be Indian money coming back, the actual
number of companies with ‘real’ FII investment could be even less. In only 9 cases
FII holding was above 24 per cent -- the main ceiling. The 10-24 per cent group is the
most important one in terms of market value of investment, followed by the 24-40
per cent group. Among the companies under study, HDFC is the only company
having more than 40 per cent FII shareholding. It is interesting to note that
Hindustan Lever got shareholders’ approval for 49 per cent FII equity. Assuming
that FIIs will take up all that equity and Hindustan Lever being a foreign subsidiary
with 51 per cent foreign shareholding, nothing will be left for the Indian
shareholders, leave alone the general public! Similar would be the case with Infosys
which is reported to have raised the FII investment limit to 100 per cent. What is the
point in such companies being listed on Indian stock exchanges? Would it not be
then more appropriate for them to get traded on London or New York stock
exchanges instead of in India!
What is equally important is that out of the total market capitalisation of Rs.
63,191 crores, or roughly US$ 12.8 billion according to the present exchange rate,
owned by FIIs, top 10 companies account for as much as 61.73 per cent and the top 25
account for over 85 per cent (Table-XI). Interestingly, Sensex (30) companies account

for about three-fourths of FII investments and NSE Nifty (50) companies account for
nearly 90 per cent of their investments. This may indicate how FII trading could
affect the two most popular stock exchange indices. Thus if the objective is to attract
FII investments, only a few listed companies are relevant and the ceilings on FII
investments are irrelevant in an overwhelming number of cases.

Table - X
Distribution of Companies and with FII Investments
and Market Value of the Investments

Share of FIIs Companies with FII Investments Market Value of FII Investments
Number Per cent to Total Amount Per cent to Total
(Rs. Cr.)
(1) (2) (3) (4) (5)
0–1 340 53.71 259 0.41
1–2 56 8.85 382 0.60
2-5 106 16.75 3,121 4.94
5 – 10 58 9.16 2,633 4.17
10 – 24 64 10.11 36,297 57.44
24 – 40 8 1.26 16,847 26.66
40 + 1 0.16 3,652 5.78
All# 633 100.00 63,191 100.00
Nil 1,941
# Including 20 companies for which market capitalisation is not available.
Note: PSEs which were left out of the earlier tables are taken into account here.

Banks (including those belonging to the private sector) and financial

institutions hold less than 7 per cent of the market capitalisation thereby indicating
their limited role in the new environment. Next important category of institutional
investors is that of mutual funds (including UTI), which are looked upon to mitigate
the problems of small investors. Even if all the investment held by MFs is credited to
the Indian public, share of the public would be less than one-fourth of the total.
However, certain questions arise regarding the investments of MFs. It is not
necessary that not all the unit holders are individuals and not all the funds with MFs
are invested in equity shares. A quick estimate suggests that at the end of May 2002,
equities accounted for a little less than 30 per cent of the total net assets of a about Rs.
1 lakh crores assets of the MFs. Bulk of the investment is in the form of debt. While
MF investments are in about 1,400 companies, 100 top companies account for over 90
per cent of the total investment.

Share of Top companies# in Market Value of FII Investments@

Category Market
Capitalisation Per cent
(Rs. Cr.) to Total
(1) (2) (3)
Top 10 39,010 61.73
Top 25 54,125 85.65
Top 50 60,258 95.36
Top 100 62,400 98.75
Total for 633 Companies 63,191 100.00
Sensex 30 47,757 75.58
BSE 100 51,310 81.20
Nifty (50) 56,772 89.84
Nifty Junior (50) 2,417 3.82

Nifty + Nifty Junior (100) 59,199 93.68
@ As in Table-X, PSE are included here.
# In terms of value of FII investments.

It is a fact that apart from individuals many large companies and banks invest
in MFs. Investments during 2000-01 in MF units (including UTI) by 4,752 companies
and banks covered in the Prowess corporate database of CMIE worked out to almost
16,700 crores. Though direct comparisons are not appropriate, this amount is
equivalent to about two-thirds of total value of MF investments covered in Table-V.
The amount covered in Table-V is also very close to the share of equity in net assets
of MFs arrived by us. In a sense, quite a high proportion of MFs’ assets belong to
companies themselves. For instance, Hindustan Lever Ltd (HLL) invested close to
Rs.400 crores in MFs at the end of 2001 while MFs’ investments in HLL are valued at
Rs. 1,674 crores. In a few MF schemes, just one or two investors accounted for an
overwhelming part of the net assets of the respective scheme. Among the companies
which accounted for more than 5 per cent of the total net assets of certain MF
schemes at the end of March 2002 are: Bharti Televentures, Grasim Inds, HCL
Technologies, HDFC Ltd, Hero Honda Motors Ltd, Hindalco Inds Ltd, ICICI Ltd,
ITC Ltd, Tata Power Ltd, etc. Incidentally, Bharti went public towards the end of
January 2002 and raised about Rs. 834 crores. Practically all of its portfolio of MF
investments was acquired during 2001-02.
It is said that while during 2001-02 MFs mobilised Rs. 1,64,523 crores, the
redemptions were as much as Rs. 1,57,347.97 crores. Could the ordinary investors
have invested so much in MFs and would they be churning their MF portfolios so
vigorously? While this requires a closer examination, it further indicates the
possibility of large investors being behind the volumes and MFs may not after all be
the vehicles for investment of small investors alone. Evidence indeed points to the
dominant role played by large companies in MF transactions. For instance, te total
purchases and sales of MF units by Tara Power Co. Ltd. During 2001-02 were about
Rs. 8,900 crores. Correspomding figures for Bharti Televentures, Hero Honda Motors
and ITC were about Rs. 6,000 crores, Rs. 4,500 crores and Rs. 3,000 crores
respectively. Face value of Grasim’s dealings were nearly Rs. 900 crores.
Interestingly, Hindalco dealt with more than 175 crores units, a significant
proportion of which being that of the group’s MF.
Another observation regarding MFs is that most schemes invest in only a few
companies. Often, the lists of such companies overlap. An important factor is that
while there are 37 MFs (including UTI), the ones who really matter (in terms of net
assets) are about half of the total. On the other hand the MFs operate about 600
schemes, outnumbering the active scrips, making it difficult for the small investor to
choose the best and appropriate one. Indeed as NSE put it : “…proliferation of
number of MFs and their schemes has made investors as bewildered as they are with
securities. The investor likes choice, but he is lost with too many choices”. A few
points need to be considered here: (i) MFs’ involvement takes away the real essence
of raising resources directly from investors; (ii) given their functioning, MFs may not
be the right choice to mitigate the problems of small investors; (iii) the involvement
of MFs and other institutional investors may in fact be adversely affecting the
liquidity of many companies; and (iv) there seems to be a degree of cross circulation
of funds between companies and mutual funds, thereby creating a situation of
money chasing money.

Private Corporate Bodies
From Table-V it was seen that companies other than the ones included under
promoters and persons acting in concert, account for 3.99 per cent of MCAP. Apart
from FIIs, it should be expected that threat to incumbent managements would come
mainly in the form of corporate bodies. In most cases, shareholding of other
corporate bodies is quite low (See Table-XII). What is more relevant, however, is that,
as noted earlier, in quite a few cases the relationship of these companies with the
promoter groups is obvious. For instance, in Ambalal Sarabhai Enterprises (ASE), the
14.78 per cent holding of Sarabhai Piramal Pharmaceuticals Pvt Ltd (SPP) is shown as
non-promoter holding. Both ASE and Nicholas Piramal hold 2,25,00,250 shares of Rs.
10 each of SPP. SPP, could thus be a 50:50 joint venture of the two companies. It
would be illogical to expect that SPP would not support the promoter group. The
two non-promoter corporate bodies reported in case of Blow Plast also could be
traced to Piramals. It does appear that wherever shareholding of private corporate
bodies is large, the possibility of such companies being related to promoters is quite
high. One also finds many investment and trading companies among the private
corporate bodies category. Some of these have their registered offices at places where
a number of such companies have been registered over the years. This indicates the
possibility of channeling black money into the stock market and/or the companies
being used by stock brokers.

Distribution of Companies According to the Shareholding of
Non-Promoter Private Corporate Bodies

Share of Private Companies in No. of Companies

Equity (%)
(1) (2)
Less than 2 809
2–5 621
5 – 10 447
10 – 25 480
25 and above 217
All Companies 2,574

Market Trading
Table-XIII shows a tremendous growth in market turnover and market
capitalisation of listed companies during the post-liberalisation period. The figures,
however, suffered a major set back during 2001-02 as a result of the exposure of scam
allegedly involving Ketan Parekh, Tehelka exposures, September 11 terrorist attack
in the US, December 13 attack on Indian Parliament, war threat and the communal
holocaust in Gujarat.

Market Turnover and Market Capitalisation of Listed Companies
(Amount in Rs. Cr)
Year Market Turnover All-India Market
NSE BSE All-India Capitalisation
(including others)
(1) (2) (3) (4) (5)
1990-91 DN 36,012 N.A. 1,10,279
1991-92 DN 71,777 N.A. 3,54,106
1992-93 DN 45,696 - 2,28,780
1993-94 DN 84,536 2,03,705 4,00,077

1994-95 1,805 67,749 1,64,057 4,73,349
1995-96 67,287 50,064 2,27,368 5,72,257
1996-97 2,95,403 1,24,284 6,46,116 4,88,332
1997-98 3,70,193 2,07,644 9,08,691 5,89,816
1998-99 4,14,474 3,11,999 10,23,681 5,74,064
1999-00 8,39,052 6,85,028 20,67,031 11,92,630
2000-01 13,39,510 10,00,032 28,80,990 7,68,863
2001-02 5,13,167 3,07,292 N.A N.A.
DN= Did not exist.
NA=Not Available

This overall growth, however, has been accompanied by heavy concentration

in a few companies and sectors. While 5,782 companies were listed at BSE at the end
of March 2002, only 3,223 were traded any time during 2001-02 i.e., 2,559 companies
(44 per cent of total) were not traded at all during the year. Even among the 3,223,
quite a few were traded infrequently. In addition, about 1,400 companies (24 per
cent of total) were traded on less than 50 days during 2001-02. Interestingly, the low
level of trading in many of the scrips is accompanied by large volumes. Indeed,
there is excessive concentration in trading. For instance, at the NSE, top 50
companies account for nearly 92 per cent of the total turnover. The volumes were
driven by the so-called new economy stocks in 1999-00 to an all time high. And these
continued to be the market favourites in 2001-02 as well. Out of the top 10 most
active shares at NSE during 2001-02 (in terms of market turnover) all except Reliance
Industries were new economy stocks. Sectoral concentration is evident from the fact
that out of the top 50 companies, those in information technology accounted for as
much as 67 per cent of the market turnover. Thus even in the unlikely situation of
there being no other IT company in the remaining ones, the share of IT sector would
be at least 61 per cent of the total. The lopsided emphasis on these stocks has been
created and sustained by the institutional investors and has also been manipulated
by scamsters.
The insignificant trading in many scrips indicates the possibility of many
duds being listed at BSE. Out of the 5,688 companies for which stock transaction
details are reported in the Stock Reach pages of BSE and collected on 3rd and 24th
June 2002, it becomes evident that as many as 2,415 were suspended from trading
and 2,535 were placed under the ‘Z’ group (of companies not complying with certain
listing requirements). In all, 3,399 companies were either suspended or were placed
under ‘Z’ group. In many of the cases trading was only nominal.
From the BSE website it has also been noticed that while 629 companies were
delisted, 482 of these were delisted because of non-payment of listing fees. 571
companies, which have already been suspended from trading have been placed by
BSE under the ‘Unknown category’ as of 15 June, 2002 because correspondence
addressed to these companies at their last known address was returned undelivered
by the postal authorities for reasons such as "not known", "shifted" etc. This number is
quite large compared to the 229 “vanishing companies” reported recently by the
Ministry of Law Justice & Company Affairs. In any case, as far as the investor is
concerned, the huge number of companies whose shares are not traded are as good as
vanished because he cannot hope to recover even a fraction of his investment in such
companies. A good number of these may well be existing only on paper with virtually
no activity. A cursory look at the quarterly results does suggest such a possibility.

Summing Up
If promoters and intermediaries provide bulk of the risk capital, and
individuals have very little stakes, a question arises about the disintermediary role of
the stock market. A related issue is based on the experience of US and UK, the
models India and other developing countries are seeking to adopt. These are based
on the assumption that there is a complete division between managers and
shareholders, the real owners of enterprises. Since the managers cannot be trusted to
put the investors’ money to best use and in the long term interest of the enterprise,
the market is expected to monitor and discipline them. The shareholding pattern
witnessed above is hardly conducive for the market to play its role. Given such high
promoter stakes, hostile takeover bids are unlikely to succeed. In fact, there have
been very few such bids in India and even these turned out to be attempts at making
quick money rather than genuinely seeking management control to improve the
performance of the target company.
Following Cadbury Committee’s recommendations and the East Asian
financial crisis, the issue of corporate governance has occupied centre-stage. It has
now become a paying proposition for many to talk of the issue. In India,
interestingly, the private managements have been quite active in developing a code
of corporate governance probably to convince the world that they are capable of self-
governance. It is not as if Indian policy makers were ignorant of the need to regulate
managements. One of the objectives in appointing nominee directors by financial
institutions was to keep a close watch on the managements and make the company
boards function effectively. Auditors on their part had to disclose the reasonableness
of transactions with related parties. There were limits on managerial remuneration
and inter-corporate investment and loans. Many of these had to be introduced both
with a view to improve disclosures as also in response to the misdeeds of certain
industrial Houses. In practice, these were, however, nullified due to poorly drafted
rules, weak definitions, political interference and outright negligence and corruption.
For instance, great falsehood is being perpetrated in defining ‘companies under the
same management’ under the Companies Act. In spite of these limitations, analysts
pointed out how involvement of nominee directors improved company boards’
What gets distributed as dividends is relatively a small amount. Given the
shareholding pattern, nearly half of the dividends distributed go to the promoters and
only about one-fifth to one-fourth goes to individual shareholders. That leaves capital
appreciation as the main attraction of the stock market. Capital appreciation in crude
terms, however, is nothing but one investor who thinks that he can get a better deal
from yet another investor giving it to another investor. One cannot get help drawing
similarities between lottery and the stock market. In a lottery, the few winners get a
part of the money put in by all other purchasers of that lottery’s tickets. The one who
is running the lottery doesn’t give away anything. If promoter shareholding can be as
high as 90 per cent, the listed companies will be no better than lottery counters. There
is no question of the general public benefiting from the fruits of enterprise. On the
other hand, there is no question of the enterprise getting constrained due to lack of
funds if it had not got listed. The premium that such a company charges while making
the public offer would be more often than not unjustified.
What significance can one attach to market capitalisation in the face of such
high stakes by the promoters? If turnover also is so highly concentrated in a few
scrips and sectors of what relevance are the comparisons with GDP and the
inferences drawn on the basis of such indicators of ‘capital market development’? Is

the purpose of such listing to make promoters artificially wealthy, generate business
for the intermediaries and for the governments to feel happy about having achieved
a fairly high degree of ‘stock market development’? If promoters of Infosys hold
about 29 per cent and of Wipro 84 per cent respectively in the two companies, can the
share prices of the two be compared at all? If with such high promoter shareholding
Wipro stands at No 2 in the overall rankings of market capitalisation whom does
such a valuation benefit? What is evolving is a sham market with all the trappings of
a stock market.
Who is now at the center-stage? Is the purpose of developing stock market to
provide finance for enterprise? Or, is it to attract foreign portfolio investments and
help the enterprises in a roud about manner? Is it to provide profitable investment
opportunities to individuals so that both individuals and enterprises benefit? If that
is so, the minimum non-promoter shareholding should be much higher than 10
percent. In spite of its other failures, the Foreign Exchange Regulation Act, 1973 (FERA)
stipulated a minimum of 60 per cent outside shareholding. Joint sector ensured such
shareholding at 49 per cnt. If for fear of losing control companies do not come to th
market, let them remain closely held. If disintermediation has to be meaningful, the
minimum non-promoter shareholding should be reasonably large. Why should any
company be ‘attracted’ to the stock market? It would come on its own if it needs
public money. In the post-liberalisation period, there has been a conscious move to
devolve decision-making authority from the government to company boards and
shareholder meetings. With such high promoter stakes, general meetings will be more
of formal gatherings rather than having any effective voice. Choice of members of the
board – whether ‘independent’ or otherwise -- would practically rest with the
promoter group.
It should not be forgotten that the need for globalisation of capital markets
arose from the interests of developed countries themselves. Their banks were losing
money in crises in Latin America. They had also to find a secure retired life for their
citizens. The need for foreign capital by developing countries, even if they do not
know what to do with it beyond a limit, came in handy for the developed ones. With
the emphasis on attracting foreign portfolio investments, the very focus of stock
market has been lost.
The unfolding of events in US underlines the difficulties in regulating the
stock market. It is anybody’s guess whether developing countries have the necessary
openness, firmness and genuine desire to seek truth and punish the guilty. If
investigations into scams take ages to conclude and essential infrastructure to
monitor the market players remains underdeveloped and containment of insider
trading remains only on paper, how can one hope to develop the stock market? The
comments of Shri Prakash Mani Tripathi, Chairman of the Joint Parliamentary
Committee (JPC) that was constituted to look into the stock market scam of last year
are worth quoting: “There are elaborate procedures which make decision-making
slow. The JPC feels that long drawn rules are aimed at delaying action.” JPC is also
reported to be unhappy with the Department of Company Affairs for the delay in
action against a large number of chartered accountants identified by the earlier JPC
set up to investigate the 1991-92 scam! Indeed, the situation is best summed by the
Central Bureau of Investigation -- CBI (See Box).

Criminal Intelligence Digest
May 2001


The scams by the financial institutions in India have been happening with a tedious
regularity. The Parliament is already enquiring into the second major stock market meltdown
in the last ten years. The first one (Harshad Mehta led) was attributed to the systems failures
and we are still debating the cause of the second collapse. The blame game is on and we shall,
in due course, nominate the latest villains.
The gullible public and the inefficient banking system provide ample opportunities for the
financial institutions to play and squander the public funds. The over-heated stock market
and the laxity of the financial institutions and the watchdogs like SEBI are the other major
contributory factors. The modus operandi is fairly simple. The investors are lured to part with
their savings by promises of unrealistic returns. The banks and financial institutions are made
to part with their funds either by misrepresentation or through forgery or by simply
corrupting the bank officials. The funds are placed at the disposal of scamsters who use these
in the stock market operations. As the bubble bursts, which is inevitable, everyone becomes a
loser. Investigation, arrest and prosecution deters them for sometime but in due course new
scamsters and new scams emerge.
Breaking this vicious cycle is not difficult. If, the financial watchdogs play a pro-active role,
the scams can often be nipped in the bud. Otherwise, we will continue to traverse the cycles
of scams and punishments, shocks and disbelief and of course, the loss of money and faith.
- A.K. Gupta
Dy. Director (Coordination)
Central Bureau of Investigation (CBI)
New Delhi - 110 003
It is not enough to set up audit committees and other disclosures. There must
be a mechanism to oversee their functioning. If information filed remains in
computer files (unlike earlier when they used to be confined to office files) and
efforts are not made to collate them no purpose would be served by such
information. A case in point is the shareholding data which we had an opportunity
to look at in some detail. While it is true that we would not have been able to get
such information otherwise, a question arises what use the authorities are putting it
to. The way the information is being provided by both large and small companies
has significant ramifications for insider trading. It also appears that many companies
are reluctant to provide the details of shareholders having more than one per cent
holding in these companies. Are the inconsistencies and mis-categorisations noted
by the authorities? If so, remedial action should have been taken already. There is,
however, no evidence to that effect.
Following the bursting into open of the accounting scandals in US, Indian
authorities are reported to be thinking of starting a random scrutiny of company
annual reports for possible accounting manipulations. One thought that this was
already being done. There is also a talk of creating an additional authority and
curtail the role of the Institute of Chartered Accountants of India (ICAI). It is not as if
that Indian accounting profession did not have any adverse disclosures earlier.
Special audits ordered by the BIFR came out with startling findings regarding
auditors’ connivance with managements. Further, Global Data Services, a subsidiary
of Crisil, recently stated that while 139 out of a sample of 639 Indian companies
overstated their profits, 87 companies had also understated profits in 2000-01 and

suggested that such practices are often linked to share price manipulation and issue
of fresh equity to the public and the promoters. In the earlier issues of Alternative
Economic Survey we ourselves brought out the types of nexus between promoters and
auditors, highlighted poorly drafted rules and guidelines, and the proliferation of
companies which apparently do not have any genuine business objective and are
meant essentially to subvert the system in one manner or the other.
Audit is important not just from the point of protecting shareholders’ interest.
It has a much greater responsibility of informing the wider body of stakeholders of the
fair and true status of affairs of an entity. Given the fact that one of the world’s top five
accounting firms is involved in more than one scam should send shivers down the
spine of many. The leading firms are also involved in tax havens. After all, these are
the ones which are engaged to prepare consultancy reports for Indian companies and
governments. These are the ones appointed as (dis)investment advisors. Where is the
guarantee that the reports are not tailored to suit certain interests from the beginning
and that information is not leaked out to the interested parties?
For quite some time now a large section of the Indian financial press has been
putting the government on the defensive. Often they behave like PR outfits rather
than a forum for unbiased analysis and presentation of facts. Thanks to the
developments in US, they too are forced to give adequate space to the darker side of
business and guide the investors properly. One hopes that they start taking a
balanced view.
The systems that are evolving in India are quite different from the developed
country markets. There is no point in blindly following their models, policies and
procedures. The experience of buybacks and mutual funds does point out to the
problems in transplanting ideas without understanding the ground realities. Things
as they stand today are indicative of continuing family control over enterprises
unlike US where professional managers are at the centre-stage. While the primary
motive for professional managers for manipulating accounts would be to keep their
jobs and increase their perks, for the business groups here it is a question of
maximising benefits for the family. While in the former short-termism may be the
rule, here it would be retaining control by the families. Just as professional managers
would seek to line their nests, beyond a limit promoters who double up as managers
do not care for other shareholders’ interests. Here the main problem is not under or
overstatement of profits alone but is how to plug siphoning-off funds by the
promoters. Under or over statement of profits, though important, is undoubtedly
different from siphoning-off. With the focus being on American corporate scandals,
this aspect is hardly being talked about in India. There are different types of
promoters; some who kill the goose that lays golden eggs and some others who
polish off the eggs and show to the outside world much smaller ones. There are also
the others who try to rear geese by imitating others even though they themselves do
not have the faintest idea of how to go about it. Very few if it all, justify their
fiduciary role, in letter and in spirit. The arguments of market regulation through
share prices, trading and corporate control are relevant for those seeking to do
genuine business but not for those having ulterior motives. There is no escape from
developing proper checks and balances and enforcing them strictly. For this one
need not always have to reinvent the wheel or wait for some upheaval in developed
Stock markets cannot be there for serving the interests of a few. The present
approach unduly favours the promoters and needs to be discontinued forthwith.
Effective measures have to be put in place to prevent the managements from abusing
their excessively high shareholding. The promoters should be made personally

responsible for omissions and commissions. Access to the market must be related to
genuine need for funds rather than to benefits flowing from limited public
participation. The minimum public offer should be placed considerably higher than
the present 10 per cent. The massive deadwood has to be cleaned up. Authorities’
words should be translated into action instead of remaining paper promises to be
repeated again when another scandal hits the market. Until then, it is unwise to push
the investors to the stock market by reducing the attractiveness of fixed income
investment opportunities.
Policing the corporates is a tough and massive task. In the face of increasing
disclosures even SEC is asking for more and more funds to strengthen itself.
Obviously, SEBI’s demands for more powers and staff would also receive
sympathetic consideration. Ultimately, however, would all these efforts ensure
emergence of efficient enterprises? A billion dollar question is whether given all that
they wanted, will the authorities in countries like India act with the sincerity,
commitment and alertness required for managing a genuine market. If indeed, they
are capable of doing so and let institutions function without undue political
inference, would it then really matter whether enterprises are financed by banks and
financial institutions or by scattered individual investors or whether a company is in
the public or the private sector?