Are investment bankers the Worst people when weighed on the scale of Ethics ? Guess the Collapse of Wall Street in 2008 and recent Loan Scam has ample evidence to prove the same.
Money Matters Financial Service – MOMF has a questionable history, window dressed by broking firm IIFL. MOMF bought Dover Securities, listed on BSE, and reverse-merged with Dover Securities. Under the guidance of IIFL, MOMF did a QIP Placement to Goldman Sachs, Morgan Stanley and other FIIs at Rs 625 raising around Rs 400 Cr.
The Unanswered Questions:
How come none of the Institutions questioned the Business practice of MOMF ? Were they all too blind or were they told bribe is the way to get Work done in India or greed made them overlook this issue ? In India it is not uncommon to give Kickbacks for favoring a Deal and MOMF tried to build a business around this but short-circuited now. Consider for example, HDFC lending its name to the IPO of Nitesh Estates via HDFC Mutual Fund when it was widely known that Sr. Fund Manager and CIO Mr. Jain hated Real Estate Stocks in his portfolio, but may have acted under pressure. There are many other Larger Scams [SEZ, Mining, Reliance Insider Trading, etc] in India which are not uncovered due to some vested interests, however I am not sure why MOMF was the target, well can’t help it, they have done bad, suffer now.
ON IIFL & Investment Banking Ethics :
IIFL in 2000 was really a good firm with fantastic fundamental analysis, but in the rate race may have forgotten all ethics and just want to get big numbers and make it a Hot i-Bank on Dalal Street. IIFL failed in its due diligence on MOMF business model or did they overlook ? IIFL in its report on 22nd November, put a BUY recommendation on MOMF with a target price of Rs 850, probably under pressure from QIP buyers who had locked in their money for few months with the stock going no where. However, in the research report, IIFL has warned that Key Sr Executive are responsible for the success of the business and arrest of its CEO explains the stock hitting Downward Circuit continuously in the last 3 trading sessions.
Well, when you talk about ethics in these firms, you are probably going to hear, Pal this is not your High School Class, just get the work done 🙂
After having read the papers for the past two days, i still wonder why people are making a big deal about IIFL having done the QIP for Money Matters since you are not expected to employ private investigators or snoops for a due diligence but look at audited statements to form an idea. i wonder why were the merchant bankers spared who did the Satyam QIP or for that matter those who took SKS public. shouldnt they also be hanged? anyways, people seem to be too happy to indulge in ‘see i told you so’, albeit post-mortem.
Its funny how people seem to take exception at IIFL for being the merchant banker for Money Matters whereas i dont remember any huge hue and cry being made about the merchant bankers to the Satyam, SKS Microfinance and other similar disasters of the past.