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Mascon returns to bourses through the back door 

VS Fernando  
Not many investors would remember that four and a half years ago, when the Indian primary market was at its peak, the Maruti fame and the alleged Harshad Mehta crony V Krishnamurthy, was about to take a plunge into the capital market. The Rs 7.76 crore IPO from Krishnamurthy's Mascon Technical Services Ltd (MTSL) at a premium of Rs 40 per share was indeed scheduled to open on April 20, 1995. But, on the issue date, MTSL's public offer was hurriedly called off following the Supreme Court's ruling, preventing Krishnamurthy from leaving the country, for his alleged involvement in the securities scam. Though MTSL's promoter group included three technocrats - Nandu N Thondavadi, a US citizen, KR Parameshwar and S Ramachandran - besides Krishnamurthy, his son K Chandra and three of their group companies, MTSL was unmistakably a Krishnamurthy outfit. So, the deluge of negative publicity that inevitably followed the dramatic Court ruling effectively scuttled the company's chances of going public even at a laterdate.

Now, after serving their term in corporate oblivion for more than four long years, the trio of Thondavadi, Parameshwar and Ramachandran is back in action. Counting on poor public memory, but at the same time, probably not wanting to take any chance with a fresh public issue, the trio has now worked their way to the centrestage through the corporate back door. First, without public knowledge, Thondavadi picked up 24.9 per cent stake in the Delhi-registered but Calcutta-based Assan Leasing & Finance (India) Ltd (ALFIL), a nondescript listed finance company. Perhaps in anticipation of an impending takeover from Thondavadi's US outfit, ALFIL underwent a change of name in fiscal 1999 itself to Mascon Global Ltd (MGL).

In June this year, Martek Holdings Inc, USA (MHI), apparently incorporated after MTSL's aborted public foray in 1995 by Thondavadi, entered into a Memorandum of Understanding (MOU) with certain large shareholders of MGL for acquiring a 28.84 per cent stake. The public announcement intending thetakeover was made by MHI on June 10. Interestingly, though Thondavadi was a major shareholder-director of MHI, he claimed that he did not act in concert with MHI in the takeover bid! The mandatory open offer to public shareholders, made at Rs 10 per share remained open between August 2 and 31.

According to Ind Global Financial Trust (IGFT), managers to the offer, MHI mopped up 7.67 lakh shares from MGL's public shareholders. Significantly, ALFIL itself had gone public with a Rs 1.90 crore par offer when IPOs from NBFCs were ruling the roost in 1995. Yet, ALFIL's public foray was a huge fiasco with the issue just `managing' to scrape through by the proverbial coat of paint. The final shareholder count of 223 for ALFIL's public offering aptly explained the extent of the debacle. While the beginning was forgettable, given ALFIL's general lack of direction and a recessionary economy, it was no surprise that the company dished out poor financial performance in the following years. Though the working results for the 6-month period ended March 1999, announced by GN Gupta, ALFIL's co-promoter as per its 1995 offer document, showed a marked improvement, it turned out to be just the precursor. The big bang came only last week. This time, the company's impressive bottomline of Rs 4.25 crore on a turnover ofRs 28 crore for the first half of the current fiscal was announced by S Ramachandran, who was earlier on the board of the grounded MTSL. But, more than the phenomenal financial figures, what was intriguing was the subtle skill with which the extensive advertising blitzkrieg was mounted.

While the ad copy itself seemed innocuous at first glance, the underlying message was discernible. In giving credit to about 450 `Masconites' for its fine financial performance, the company perhaps wanted to convey to investors that it employed so many people. But, a scrutiny of its fiscal 1999 annual report depicted only a solitary entry under the `highly paid employees' category, and the recipient was an ex-MTSL man! The company's annual report for fiscal 1999 lists GE and Citibank among its major clients. It also talks about how its project for GE adhered to six Sigma quality, which is a very demanding certification. No doubt, the qualification and experience profile of the top management appears to be of the highest order.

But, instead of making one comfortable about dealing with such a promising company, the manner in which the super technocrats have chosen to sneak through the rear entrance to the bourses causes consternation. Though ALFIL's new avtar, MGL, does not bear any reference to Krishnamurthy or his companies, the suspicion still exists. For instance, MGL recently obtained the shareholders' consent for appointing G Balu Associates, chartered accountants, Chennai, as its auditors who were incidentally the auditors of Krishna murthy's grounded MTSL!

Again, MGL is in the process of shifting its registered office from Delhi to Chennai, which also accommo dated MTSL's registered office. And, half of MHI's management team has a MTSL legacy!

What's more, MTSL's managing director, R Gowrishanker, himself had revealed in 1996 that MTSL had planned to acquire the US-based Martek Inc with which the former had developed a `symbiotic relationship' over the years! In this backdrop, what could be the real reason for the friendly takeover at MGL? Is its small capital base and a manageable shareholder population the only attraction? Or, are MGL's new promoters only interested in `readymade' market capitalisation to play around with? Whatever may be their explanation, the empirical evidence in MGL scrip's trading pattern on BSE makes disturbing reading. Except on August 23 when the counter posted a relatively huge volume of 1.42 lakh shares in just 3 trades, on most other days, only a solitary trade for a bare minimum of 100 shares was witnessed. And, even with such an abysmally low volume, MGL's price line hit the circuit filter almost every day! Obviously, some `insider' seems to be activating the counter. And, with the company intending to make a privateplacement/preferential issue of equity shortly, the last is yet to be heard about MGL on the bourses!

[E-mail feedback to: investar@bol.net.in] (Arranged by INVESTAR -- The Aarthik News & Research Syndicate)

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