Fighting battles and trading charges

Hindustan Lever is probably among the best known foreign firms in India. It has been so closely identified with India and its values, that some people forget that it is a multinational corporation. But seldom in its history has its reputation come under a cloud. But the recent charge of insider trading by the Securities and Exchange Board of India has stung it to the core. Lever sees it as an unfair attempt by SEBI to sully its reputation. SEBI, on the other hand, says it is going by the book. At the heart of the problem are eight00000 shares of Brooke Bond Lipton India which Lever bought for Rs 350 a share two weeks before their merger was announced in 1996. After the announcement the share price shot up to Rs 410. Now SEBI says that this amounts to insider trading. Since the management of Lever knew about the merger, they had an unfair advantage over other possible buyers of Brooke Bond shares. In its defence, Lever says that since it was a party to the merger deal, it cannot be termed as an insider under SEBI rules. It says that the shares were bought to retain 51% equity of parent firm Unilever in the new merged entity. The company has even taken its plea to the Finance Ministry. North Block though has declined to interfere in the matter. SEBI has asked Lever to give a written explanation of its actions after which it will decide on what action to take. The whole issue of whether insider trading occurred will depend on the interpretation of the word insider. This the first instance of SEBI taking on a large company on the charge of insider trading. It is not as if insider trading is unknown in the corporate world. But most of time it is difficult to prove. Irrespective of its final outcome, the Lever case will have a tremendous impact on the corporate world. Spilling paint Another well-known company which went through turmoil this week was Asian Paints. A change of guard is likely to take place at the largest paint company in India. This follows major differences of opinions among the Chokseys and the other three promoter families (the Danis, the Choksis and the Vakils) on the funding of the company’s expansion plans. The plan of Choksey for a GDR issue was reportedly rejected by other promoters as it would have diluted their holdings. The managing director of Asian Paints, Atul Choksey is likely to step down from the company’s board following sale of his 9.5% stake in the company to foreign institutional institutions (FIIs). Two FIIs are backing out because they do not see a future for Asian Paints without Atul Choksey. Bad news When the Lok Sabha was busy fighting over the IRA Bill on August 6, another drama was being played in Hotel Taj Palace, the venue of CII’s international conference on insurance. The conference was expected to coincide with the passage of the Bill. This would have sharply lifted India’s image abroad as a country which meant business. Not surprising, there was nervous excitement among the various delegates. Speakers throughout the day kept looking at the watch and referring to the debate in the Lok Sabha. “Any minute now we will hear the good news,” one speaker said. Finance Minister P. Chidambaram was to speak at the conference but could not because of the Bill. At each interval, the delegates would ask journalist about the developments in Lok Sabha. and when the news of the withdrawal came, there was disbelief among most delegates. There were different accounts of what had happened. But when the truth finally sank in, the excitement of the day quickly gave way to statements of well-worded disappointment.