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Brokers corner 41 per cent of Nedungadi Bank

Rakesh P Sharma & George Smith Alexander

Brokers have taken control of around 41 per cent of the equity in the Kerala-based Nedungadi Bank, with at least two identified groups of brokers-led by Rajendra Banthia and Shrikant Mantri-holding 21 per cent, according to a top official.

Sources said another broker, whose name figures in the Sebi investigation into the recent bear hammering, was believed to hold around 30 per cent in the bank through a clutch of entities, none of which had crossed the five per cent mark. They added that these brokers got a sizeable toe-hold on the bank by subscribing to the unsubscribed portion of the bank's rights issue in 1996.

Confirming the brokers' significant holding in the bank, bank director CV Nair said, "The brokers hold around 41 per cent of the shareholding through proxy holdings (people acting in concert). Banthia and Mantri, as a group hold around 21 per cent stake in the bank. However, we are not able to do anything as these brokers operate through proxies and we have not been able to establish the inter-connection of these people."

Nair however denied that the bank was run by the brokers. "They, however, use their clout during the general meeting and elect the directors on the board," he clarified.

In January 1998, Banthia got two directors-MG Damani and Suresh Vaidya-nominated to the board of directors. These broker directors had pushed for appointment of Nedungadi as the clearing bank of the Bombay Stock Exchange. The other directors had opposed the move saying that it was not possible for a small branch in Bombay to handle large volumes.

Nair said the bank had informed the Reserve Bank of India about the shareholding of Banthia and Mantri and had sought its approval when broker MG Damani was elected to its board with active support of the Banthia group. "These brokers have entered through the front door and we are not able to do anything about it," said Nair.

The bank is said to have informed the RBI that Shrikant Mantri holds around 10 per cent in his name and through Shanti Devi Mantri, Vimla Mantri, Sushil Kumar Mantri, Ram Kishore Boob, Vijaykumar Soni and Megha Securities. Rajendra Banthia, along with Surendra Banthia and Saroj Banthia, is said to control around 11 per cent of the bank's equity.

The two brokers have not informed the stock exchanges, as required by the Sebi takeover code, about their holding crossing five per cent.

The bank had given around Rs 950 million between January and March 2000 to three companies fronted by these brokers-First Custodian Fund India, Harvest Deal Securities and Messers Srikant G Mantri. Of this, the bank has received Rs 750 million from the first two entities, which owe it Rs 80 million in interest. "The bank, however, has adequate collateral of shares worth around Rs 500 million on this outstanding amount," said Nair.

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