Can FTIL’s Proposed Solution Crack NSEL Logjam?

Often the solution is easy and lies before our eyes, and yet we do not see it. We move mountains and cross oceans, and yet all the while the remedy was lying in plain sight in our own courtyard.

This is what is happening with the  NSEL issue. If all the stakeholders—FTIL, the trading clients, brokers, and the government— join hands, the payment default crisis at NSEL can be speedily resolved. In fact, FTIL’s proposed solution as outlined to the government can heal the wounds of all the stakeholders inflicted by the defaulters on NSEL’s trading platform.

In a manner of speaking, the solution would entail that the pain is evenly distributed. The money trail to the last paisa has been found with the defaulters and they should be held accountable for their actions. So far, without any reason, it is only FTIL that has borne the brunt of the crisis by facing various proceedings which are sub-judice.

The privity of contract of the trading clients is with the brokers. It is brokers which have made multi-times money while transacting on the exchange. It is therefore important that they participate in the settlement process to enable payment to trading clients.

According to Business Standard, published on March 20, Prashant Desai, the Managing Director & CEO of FTIL, said, “FTIL proposes to pay Rs. 500 crore, of which Rs. 180 crore was already paid in 2013, with the brokers contributing equally”.  The proposed solution is without prejudice and is subjected to FTIL shareholder and board approval.

If all the parties concerned agree to implement it with government help, all trading clients with exposure of up to Rs. 1 crore, which are 11, 954 in number, will get at least half their dues as reported in the Business Standard article. The PSUs will receive 100% of their claims.  

Mr. Venkat Chary, the chairman of the FTIL, too had reiterated that “around 94% of trading clients’ claims can be immediately addressed in part or full measure by Rs.1, 000 crore payment.” 

Eleven defaulters have admitted liability of Rs 2,000 crore and high court has issued decrees for Rs 513 crore.

If all parties contribute and come forward to resolve the NSEL issue, then it will be one less problem for the government to solve.  

Overwhelming support for FTIL - Shareholders object to merger strongly

At the foreground, responses and objections, particularly, against the merger, zoom past everything else currently. As the proposed idea of amalgamation of NSEL with FTIL sprung up lately, support for FTIL, against the government’s decision to do so has been scampering in boundless and humongous volumes across the social media. Albeit the severity ratcheted enormously, nothing obviated the views, ideas and opinions from deluging the social media spouts indiscriminately.

Pained by extreme throes, shareholders have inundated several media platforms with their overwhelming responses against the proposed merger by the Ministry of Corporate Affairs (MCA). Definitely not a rumpus, but a disciplined swarm of views of shareholders, creditors and employees flocked the board, objecting to the proposed amalgamation.

Subsequent to FTIL management’s urge to vote on the government’s proposal - as per the records, close to 99.55% of the shareholders of the company voiced against the idea of merger, which translates into 18,700 shareholders; these shareholders also represent 79.5% of the equity capital in the company. Supplementing their votes, were the votes of the company’s creditors, 1000 employees and the board of directors, according to the news reported by Business Standard on March 10, 2015.  

“The merger proposal is detrimental to the interest of 63,000 shareholders and over 1,000 employees of FTIL. Nearly 80 per cent of our shareholding and a majority of other stake holders have clearly indicated they are against the proposed amalgamation in the name of public interest of trading clients of NSEL...….”

It was also stated by FTIL that the fallout of votes were computed; the shareholders emailed their responses to the MCA, marking a copy to FTIL, coinciding with the final date of the voting deadline stipulated by the high court; the responses were verified by competent bodies viz. KDS & Co. and an independent auditor, the report further stated.

Spread across 26 states, 5 union territories and 12 nations, the 18,700 shareholders took the baton of responsibility and initiative of voicing their views and responses, in order to make them heard by the law dispensing authorities and judiciary, at large. The exercise of monitoring was, supposedly, to prevent the responses from frittering away from people’s attention and the media, as they may be substantially crucial in making the authorities take cognizance of FTIL shareholders’, creditors’ and employees’ interests and concerns at stake.

It was also observed that the suggestions, concerns and objections on the draft order of the proposed merger inexorably persisted and continued to flow in, besides the ones that couldn’t get through due to mailbox getting filled up by the flooding mails. As per the company’s record, roughly 12,500 e-mails bounced back; thus the hard copies of those were sent to the MCA, in the form of a CD (compact disc), ensuring no response, email or objection is left unnoticed, unread and unheeded.

On the occasion, Venkat Chary, Chairman, FTIL, reacted, saying, “The merger proposal is detrimental to the interest of 63,000 shareholders and over 1,000 employees of FTIL. Nearly 80 per cent of our shareholding and a majority of other stake holders have clearly indicated they are against the proposed amalgamation in the name of public interest of trading clients of NSEL. While the recent report clearly questions the genuineness of 13,000 numbers of trading clients coupled with entitlement thereof, whereas the approximate 80% shareholding are real investors with complete know your client (KYC) bonafide owners of the Company who have objected to the amalgamation and have expressed solidarity and faith in the Company and its management.”

In all fair-mindedness, with no prejudice whatsoever, the spate of responses is believed to impact the happenings positively; though not eerily dishevel the process, but make the authorities believe in FTIL’s healthy existence, and re-emphasise the phenomenon and sanctity of “Limited Liability” beyond anything that may be misperceived and misarticulated to be irking and slovenly, in the whole episode.

(Source - http://www.business-standard.com/article/markets/majority-of-ftil-shareholders-objects-to-nsels-amalgamation-with-it-115031000984_1.html) 

Quoting futuristic vision of FTIL – on board expansion

FTIL Board reaffirms its confidence in Management Team to execute on its Founders’ Vision for ‘Digital India @ 2025’ as part of FT 3.0. ‘Made In India’ Technology to Build and Power India’s own equivalent of Amazon, Google, Alibaba and Baidu et al over next 10 years. In the series of events, ODIN to be spun out as separate subsidiary or SBU to attract majority strategic partner / investor was the highlight.

As the new directors were welcomed, the experts in FTIL alluded that the vision 2025 for FTIL was futuristic and pragmatic. The occasion of the expansion of FTIL board got stimulating citations from the leaders of FTIL, as well as the new directors.

Mr Venkat Chary, IAS (Retd), ex-Chairman FMC and Chairman FTIL, welcomed the new Directors on the Board, saying - "Both Berjis and Anil are world class industry seasoned professionals known for being highly independent and vocal about corporate governance and protecting minority shareholder interest on the companies where they serve on the Board, and FTIL will certainly benefit from their experience as the company transforms itself under leadership of its Founder and MD, Jignesh Shah, in to technology partner to build and power new generation digital enterprises that will emerge over next 10 years as part of his vision Digital India @ 2025. Prashant Desai is a thorough industry professional and has played key role in IR and M&A over past year at FTIL."

Mr Jignesh Shah Founder and MD of FTIL also congratulated the new Board of Directors and said, "I have no doubt that the new Board coupled with FTIL’s technology, scale and execution capabilities can significantly contribute in creating & powering at least 100 new digital leaders in 10 key sectors over next 10 years. These new Digital Disruptors will be the bellwether of inclusive development and growth besides creating a domino effect in the ecosystem that will be breeding ground to more new entrepreneurs, start-up’s and job creation and will become the showcase of Digital India by 2025."

Mr Berjis Desai said, “FTIL is a global leader in building robust, enterprise class, scalable and cost efficient technology for developing but fast growing markets like India, SE Asia, Middle East and Africa and I’m excited to be part of its Board as the company embarks on its journey to shift orbit and become preferred technology partner for India’s next emerging tech-enabled giants in key vertical sectors, in line with its Founder’s vision of Digital India @ 2025."

Mr Anil Singhvi said, "I believe, FTIL with its world class Talent, Technology, Capital, Infrastructure and Leadership is ideally poised to become the obvious choice as partner for entrepreneurs and organizations, who would rather outsource the services and conserve the resources to scale up their business. I’m excited about the journey ahead and optimist about FTIL Management team’s ability to execute on Founder’s Vision of Digital India @ 2025".

Mr Prashant Desai added to their view saying, "Despite the recent challenges, there is renewed positive energy within all corners of FTIL. The team is confident of its ability and is confident that FT 3.0 will emerge as a unique Indian IT company focused on ‘technology + innovation+ enterprise’ DNA of FTIL and in the process create significant shareholder value. I am very happy to be on the Board."

Subsuming the views and quotations, the metamorphosis of FTIL with the latest FT 3.0 technology complemented their views and space-age vision for FTIL, to enthuse stakeholders with realistic growth that is expected to be exponential in the coming times.