| While some companies like Coca-Cola and IBM decided to leave the shores of India rather than dilute their shareholding, the majority stayed back. As a result, Indian investors got to apply in offers for the sale of Colgate, Ponds, Hindustan Lever and Ingersoll Rand, to name a few. IBM and Coca-Cola paid a heavy price for their almost-two decade absence in India. |
| Investors made a real killing in those 1978-80 offers, courtesy the conservative pricing mechanism adopted by the Controller of Capital Issues, a war-time post created by the British to channelise the flow of capital into industries that were required for the war. |
| George Fernandes, by default, may be the true father of the investment cult in India. Though FERA was enacted by Mrs Gandhi's government, it was Fernandes who picked up the gauntlet during the Janta Party regime. |
| For many decades, the MNC stocks, often referred to as FERA stocks, continued to dominate the investment psyche. Good dividend payout ratios, timely bonus and a clean balance sheet made the MNC stocks a by-word for "blue-chip" before the software stocks came on the scene. |
| But after delisting, the MNCs are not leaving Indian shores. In fact, they are digging in deeper, ramping up their capacities, introducing new products, and some are even relocating their global functions here. |
| Cadbury, ITW Signode, OTIS , Philips and Reckitt Benckiser are among the names that come to mind that have been delisted from the bourses but continue to do roaring business. |
| One of the reasons that these MNCs want to go private is to reduce the level of disclosure, which sometimes is a hindrance (disclosure requirements are on the rise as regulators become more vigilant and alive to the needs of the investors). |
| But a major motivation to go private remains the unwillingness to share the booty. No wonder that most pharma MNCs have floated jundred per cent subsidiaries through which most of the new products in India will be released. |
| It's a matter of time before other companies with strong IPR traits like Monsanto or Bayer Crop Science may be made private. For others, it may be a policy decision. For instance, none of the 72 other subsidiaries that 3M has worldwide is listed on any stock exchange, except India. |
| While some companies have continued to serve the small investor after delisting, some like Digital Globalsoft have not. Digital Globalsoft was delisted in 2004. For some time it continued to live amicably with the residual Indian shareholders, but one fine morning in 2006 it reorganised its capital and the face vale of the share was changed from Rs 10 to Rs 2,50,000. |
| So anyone holding less than 25,000 shares was sent a cheque for his holding as you can't hold fractional shares. Not many complained as the amount paid was at 100 per cent premium to the open offer. |
| This is where the regulators need to come in. Investors who have opted to continue to be shareholders of the company even after the delisting offer should not be made to forcibly quit. |
| Another area where a review of the existing rules is required is in the case of payment of interest where the open offer is delayed. Authorities in some cases have held that interest will only be paid to those investors who continue to hold shares. |
| Someone who buys such stocks should automatically inherit all the rights of the original shareholder. In some cases, the open offers have been delayed for years. The extant ruling motivates the defaulters to delay, as more delay results in more investors selling out and, consequently, less interest outgo for the defaulting company. |
| While the breed of foreign MNC is surely depleting, there is another breed that is doing well, the Indian MNC. They have everything that the foreign MNCs have except the nostalgia value, which, like a good wine, will take some seasons to develop. n |
| Disclaimer: All the companies mentioned in this column may have been recommended earlier at lower levels to Anagram's clients |
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