The Polyester Prince by McDonald Hamish

Author:McDonald, Hamish [McDonald, Hamish]
Language: eng
Format: epub
Tags: Business, Biography
ISBN: 9781864484687
Amazon: 1864484683
Barnesnoble: 1864484683
Goodreads: 265513
Publisher: Allen & Unwin
Published: 1998-01-01T00:00:00+00:00

Under A Matter of Style’ the advertisements extolled the company’s ‘search for excellence’ while under A Feel for Tomorrow’ they claimed Reliance was among the few companies planning for growth in the years ahead. An Obsession for Technology’ said the company’s plants had been acclairned by the World Bank and others as the most modern: ‘No wonder we chose FTA.’ And so on, to the finale, An Occasion for Thanks’, emphasising that 1.8 million investors had shares in Reliance.

The Indian Erpress began attacking the Reliance assertions even before they ended, in particular the claim in A Concern for Truth’ that not a single F Series debenture had been held by the Ainbanis in any way. Under the headline ‘The advertisement that tells a lie’

the Express pointed to the bank loans made, for the purpose of buying F series scrip, to companies like Shangrila, Virnal and Mac Investments in which various Ambanis and Meswanis were listed as shareholders. The Reliance advertisement could only be true ‘if the money was borrowed for one purpose but was used for quite another’ where then did the money go?

The answer was to come two months later, when the central bank’s Rangarajan committee gave its final report on the loan mela. It found that the 43 companies linked with Reliance had borrowed Rs 599.8 million from banks in India during 1985. These loans had not been used for buying F Series debentures after all. However, ‘a significant portion of the bank loans had been utilised to sustain the purchases of shares made earlier by substituting credit raised elsewhere by bank credit’. On 30 June 1985, before the loans, the companies had a combined liability on account of share purchases of Rs 380 million.

Six months later the liabilities had been reduced to Rs 5 million. The loans had been secure and profitable for the banks, but were not justified in the light of their end use, which the banks had not bothered to check.

Reliance immediately claimed it had been ‘cleared of all charges’ made by the press over the loan mela. The amount involved was not the claimed Rs 1.0 18 billion, and the loans had not been used to prop up the F Series issue or make speculative gains from it. The banks had complied with the guidelines on taking shares as securities, including transfer of ownership.

The Indian Express said Rangarajan had not looked at the loans given outside India by the banks. The Bank of India, the Bank of Oman and Canara Bank had given Rs 440 million to persons outside India as nominated by Reliance, and only for the acquisition of the F Series. Add this to the loans given in India and the original figure for the ‘loan rnela’ was exceeded. In addition, the loans appeared to be in breach of lending rules, since banks in India could lend only against securities already in existence. The report had actually brought out a more serious misdemeanour than the one originally reported: the loans had been used for sustaining the sharemarket.

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