Memory overload PDF Print E-mail
Saturday, 24 August 2013 00:00
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With so many investment companies to deal with, it's no surprise corporate heads don't remember names

Much has been made of Anil Ambani not remembering whether his group companies had invested in a firm called Swan Telecom that got a 2G licence from then telecom minister A Raja and later sold a 45% stake in this to UAE’s Etisalat. It is true Ambani’s group firms invested a little over R1,000 crore in the firm—R11 crore directly by Reliance Telecom and R992 crore was given to Swan in what are called redeemable preference shares. Since these preference shares which had an interest of 8% were bought at a premium of R999 each, this meant the money was given to Swan almost free—it was returned to Reliance Telecom later. It is true that, since Swan had no great assets as collateral, this extraordinary generosity was like Nassim Taleb’s famous Black Swan event. But given Ambani’s group has assets in excess of R180,000 crore, it is a bit unreasonable to expect him to behave like a bania and keep track of every R1,000 crore of investments the group makes.


Expecting Ambani to remember the names of companies like AAA Consultancy Services, ADAE Ventures, Parrot Consultants, Tiger Traders and Zebra Consultants is also a bit much, even if it is true he could have brushed up on them before appearing in court. It’s not just for Ambani, many large business groups have investment firms that run into scores, even more. The promoter can’t be expected to remember these names, other people are paid to remember. It is true some groups try to make this easier by choosing a certain type of name, of planets or animals for instance. While that makes it easier to remember names like Donkey, Monkey, Elephant, Cow, things get a bit hairy when you run out of animal names and have to resort to AAA Services or AAB and AAC. Thank God for the Companies Act that limits the number of subsidiaries a firm can have.


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