ON three consecutive days starting October 19, 1995, the front page of one of the country's premier financial dailies carried a story on how Reliance Industries had issued fake share certificates, which were rampant in the market. Panic set in. Reacting to perhaps the harshest sort of news any company could be hurt by—the shares you were holding could be just worthless forgeries—the Reliance scrip fell by Rs 13.50, or five per cent, from Rs 268.50. With very few buyers wanting to risk being saddled with fake shares, the sellers sold. And sold. Over the next 13 weeks, the scrip fell to Rs 155—a fall of more than 42 per cent. The standard line doing the rounds of Dalal Street was: "I'm a buyer of Reliance at under Rs 100."
Of course, it never reached Rs 100. In fact, in an about-turn that shocked the short-sellers, the scrip jumped by Rs 100 over the next 14 weeks. The company hit back saying that this was nothing out of the ordinary, that giving duplicate shares are routine when originals are lost, that the number of "fake" shares—which, anyway, the company had issued by mistake—were only 0.01 per cent of the total capital, that Reliance was a fundamentally-sound, fast-growing, blue-chip company. The market had probably missed the point.
Mr Canny hadn't. He went on and bought 1,000 Reliance shares when they'd fallen to Rs 155. Total shell-out: Rs 1.55 lakh. Today, he's a contented man: Reliance has announced 1:1 bonus issue of shares, and excellent six-monthly results. At around Rs 420 (see chart: Reliance), the value of Mr Canny's shares: Rs 4.2 lakh. A 2.7-fold increase. In less than two years. Which fund manager can match this sterling performance?
Lesson: a controversy is the best investment. With a thin—but important—string attached. Controversy is the best investment...