Believe it or not, the Kasliwals of S Kumars have been able to list thecountry's first dotcom company on the hitherto most stringent BSE with apublic float of just Rs 75 lakh!

The prelude to the listing of SKCL on BSE clearly establishes that thepromoters did everything to a perfect plan and with full blessings. Theirbrainchild SKCL moved at a `jet speed', minus any road blocks.

Incorporated on May 14 last year, SKCL hit the capital market within sixmonths, on November 1, with a token (mandatory) public offer of Rs 75 lakhat par. Interestingly, the Mumbai-based company, which had already drawn amega plan for a Rs 850 cr-plus-project in the field of `internetinfrastructure', cleverly proposed to have an initial equity capital of onlyRs 3 crore and opted listing on one of the country's less visible bourses --the Pune Stock Exchange (PSE).

The country's first dotcom public issue was open for the shortest duration.It was closed on the third day itself, restricting the oversubscription toonly 11 times. Speedily the company allotted the shares, in the same month,on November 30. Though the issue was oversubscribed so many times,surprisingly, as many as 4,357 applicants (out of 5,888), or 74 per cent ofthose applied, were able to get allotment -- the lowest and highest allotmentbeing 100 and 9,600 shares per head respectively.

Interestingly, on the same day of allotment, the company sent a notice toall allottees seeking their approval at an EGM scheduled for December 24 formaking a bumper preferential allotment of over Rs 22 crore at par topromoters and "outsiders".

What's more, even before the share certificates and EGM notice reached allthe allottees, the scrip was listed and traded on the Pune Stock Exchange onDecember 1, 1999. In other words, on the very next day of allotment, SKCLwas listed on PSE with a muhurat quote of Rs 80 which in fact made theproposal of preferential allotment at par ridiculous.

After peaking at Rs 475, the scrip is settled around Rs 300. How come thecompany whose public float was just Rs 0.75 crore has been listed on theBSE, where the stringent listing requirement demands a minimum public offerof 10 per cent of a company's equity?

The president of BSE clarifies that the exchange was given to understandthat SKCL's promoters hold 75 per cent of the company's equity of Rs 25.80crore and the balance 25 per cent (Rs 6.45 crore) is with the public. Whenthe company's actual public issue of Rs 75 lakh amounted to just 2.9 percent of the company's present equity, how come the public holding wasclaimed, and accepted, as 25 per cent? This commonsense questionconveniently slipped, perhaps, the mind of the president and his board.

The original public stake of 2.9 per cent (Rs 0.75 crore) was held by about4,350 public investors with an average holding of 172 shares per head. Butthe company claims to have subsequently allotted an aditional 22.1 per cent,or Rs 4.70 crore, to less than 500 "outsiders" - more than a dozen of thempocketed one lakh shares each -- under a preferential allotment!

Can a preferential allotment to promoters' known people be considered apublic float? BSE does not find anything wrong with SKCL's approach. Willthe exchange apply the same yardstick to others. BSE president assures thatwho ever comes to BSE on the footprints of SKCL would be admitted forlisting.

Legally, perhaps, what SKCL has done may be "fixed" right. But, morally, canone justify the selective allotment at par (Rs 10) when the market price wasseveral times more -- around Rs 130 -- at the time of passing the resolutionat the EGM? Also, when more than 1,500 public applicants were turned outwith no allotment in November, can the company `gift' 7.6 times the publicissue the very next month to a handful of `friends and associates' and stillherd them as public? When the above question was put forth to SKCL'schairman, Vikas Kasliwal, he shot back: "If Reliance does it, no bodyquestions it; If Bombay Dyeing does it, no one questions that. But, if I doit, every one is asking why?"!

According to Kasliwal, by the preferential allotment at par he was onlyhelping his investors to make money. Of course, here, his latest preferredVIP investors are obviously his benefactors, friends and associates! Aren'tsome of them from the media, bureaucracy and politics?. Interestingly, forthe Kasliwals, the post-public issue private placement of their dotcomcompany is not an isolated one. When their flagship, S Kumars Synfab (SKSL),went public in 1993, it promised to have an equity capital of around Rs 23crore by 1999 of which, promoters were to hold about 50 per cent.

But, post-issue, when the market price of the share was depressed, themanagement proposed a bumper preferential allotment to the promoters at aprice far lower than the public offer price of Rs 36. With that the equityshot up to over Rs 72 crore and the promoters' stake to over 80 per cent upin SKSL, the equity will explode to Rs 132 crore, of which, the genuine`public float' would then amount to only 4.2 per cent!

Meanwhile, SKSL, which collected Rs 36 per share from the investing publicseven years ago and, currently, quoting at around Rs 13, could probablyexplain how much return the public investors have reaped in the long run.Coming back to the path-breaking listing of SKCL on BSE, it raises morequeries than it answers. For one, if the public float were to be blatantlyengineered and cut to a `nam ke vaste' nominal holding level in a so-calledpublic company in favour of a select few, why should the company create thescarcity of its public stock and stake be allowed the benefit of a publicquote and trade on the most venerated stock exchange of the country?

Of late, aren't the stock exchanges unabashedly changing colours more forthe benefit of the promoters and their cronies to make `the fastest buck' atthe ring?

The chosen few in majority, who are privy to privileged information, willnow be officially allowed to rig the market and take the investing publicfor a ride. To hell with insider trading and such outdated market etiquette.Now, the new rule of the regulatory game is "If you are not able to beatthem, better join them". SKCL on BSE is just the beginning of a new era of`market liberalisation'. May be, the machinations in SKCL is an openimprovisation to the growing sham public allotment deceitfully done to suitthe bulk and jumbo applicants.

(Arranged by INVESTAR - The Aarthik News & Research Group) [E-mailfeedback to:investar@bol.net.in