May 29, 2013

Corruption is Also in Indian Corporate Sector

Please read this Firstpost article :-

http://www.firstpost.com/business/not-only-netas-and-babus-pvt-sector-is-new-fountain-head-of-corruption-821165.html#disqus_thread

For UN Report , please click ( Page No. 15 )

http://www.unodc.org/documents/southasia//publications/research-studies/CI_Report.pdf  ---------------------------------------------------------------------------------------------------------------

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Asset Laden Investment Companies- Promoters Uninterested in True Value Unlocking

Promoters initially  invite public investment by selling shares in their holding companies . These holding companies promote new companies  Over a period of time their promoted  ventures succeed and the original investment made by the holding company multiplies many times over in value . Now instead of genuinely sharing the wealth with all the stakeholders non promoter minority share holders of original holding companies are treated as UNWANTED , like sort of poor relatives at a rich cousin's marriage party.

1 ) Majority stake in these Holding companies is always with the Promoters. So they are able to get all Resolutions passed . There are no Institutional holdings ( domestic or Foreign ). So  level of transparency in these companies is not at the same level as widely held companies.It suits the promoters to keep these companies in low profile and keep its true worth hidden.. Non promoter share holders suffer.


2 ) Over a period of time many share holders ' folios become dormant due to death of original shareholders and court cases .


3 ) In many pre 1947 incorporated companies many share holders migrated to Pakistan . Such folios ( Custodian of Enemy properties ) also are dormant . 


4 ) Either these companies are  not listed or these are kept only NOTIONALLY listed in Regional Stock Exchanges. Such listings are of not much use to the non promoter  share holders.


5  ) Despite massive EPS these investment companies either skip dividends or declare  woefully low dividends. Such moves keep the company in low profile and the share rate ( if any ) artificially low. Such practices hurt non promoter share holders' interests .


6 ) Despite bulging Reserves Bonus Shares or Splits are not done.  (Very surprisingly , Binani Metals Limited has done a Reverse Split to unprecedented Rs. 1000/-.


 7 ) Many such investment companies avoid sending Annual Reports to Non Promoter share holders.


8 ) Some such companies shift their Registered Offices to obscure places and hold meetings at venues which are difficult to reach. Many a time only  company officials ( with Proxies ) are in attendance  to see the proceedings through.


Investors ( non promoter ) of such investment companies should demand from the Government and SEBI to devise special Rules and Regulations for these companies


1 ) Such investment holding companies should compulsorily be listed in BSE / NSE. ( to improve liquidity ).


2 ) Face value should be split ( to improve liquidity )



 3 ) Meaningful quantum of dividends should be declared . ( Minimum 25 % of the Financial Year's EPS should be declared as Dividend  percentage ) 


Some Investment Holding Companies.


FARM ENTERPRISES LIMITED ( Reliance Enterprises Limited )


Mukesh Ambani Group ; Promoters' Shares in Reliance Industries Limited ; Not Listed , Massive EPS - No Dividend . AGM not in auditorium  ; Very few non company share holders attend AGM .Conversion of Equity Shares   to Preference shares) etc etc. Rate in unofficial market around Rs, 600 ( True Value may be in  thousands  ) .


There should be listing in the NSE .


http://www.rareindianshares.info/2009/12/farm-enterprises-limited.html


PNB FINANCE AND INDUSTRIES LIMITED

BHARAT NIDHI LIMITED
CAMAC COMMERCIAL

Belong to Samir Jain of Bennett Coleman And Company ( Times of India Group ). These companies hold promoters ' shares in Bennett Coleman And Company Limited .


Example : PNB Finance And Industries Limited ( Equity Rs. around 3 cr , Face value Rs. 10 ) holds , on consolidated basis , around 58 lakh shares of Bennett Coleman And Company Limited . This effectively translates into around 2 shares of Bennett Coleman And Company Limited for every one share of PNB Finance And Industries Ltd. Value of one share of Bennett Coleman And Co. has been worked out by some analysts to be around Rs. One Lakh ( please calculate independently ).


But share of PNB Finance And Industries Limited ( Face Value Rs. 10 ) is being traded unofficially Rs. 4500 - Rs.5000 which is a mere fraction of its true value. Although the EPS for the financial year ended was around Rs. 79  /- ,  dividend paid was only 6 % (  a return of 60 paise on an investment of nearly Rs. 5000 ).

( In the unofficial trades ,share price of Bharat Nidhi is around  25 % higher than that of PNB Finance And Industries Limited .Rate of Camac Commercial could be higher than Bharat Nidhi Limited )( There are , presently ,only buyers of PNB Finance and Bharat Nidhi shares and practically no seller ) 

No official trading in CSE .

DSE is closed.

There should be listing in NSE.


Shares should be split in to Re. 1 each .


 http://www.rareindianshares.info/2009/06/pnb-finance-industries-limited.html


http://www.rareindianshares.info/2010/09/bennett-coleman-and-company-limited.html




NBI INDUSTRIAL FINANCE LIMITED


BG Bangur group's holding company. Holds promoters shares in Shree Cement Limited ( reportedly around 8 : 5 Lakh ). No trading of NBI Industrial  ,: No dividend . Many complaints of non receipt of Annual Reports.


http://www.rareindianshares.info/2009/06/nbi-industrial-finance-limited.html


BINANI METALS LIMITED


Holding company of Braj Binani group Holding very valuable shares of Binani Industries Limited and Binani Zinc Limited . 3 : 1 Rights Issue made for a Real Estate project which was later dropped . Promoters increase their holding.  Some times increasing share capital ( Rights Issue ). Some times decreasing Share Capital  ( Share buy backs ).


FACE VALUE INCREASED TO UNPRECEDENTED Rs. 1000 ( No other Listed company in India has a Face Value of Rs. 1000 ). Many share holders became holders of fractional shares . Their ( including many dormant folios  ) shares compulsorily sold   at fraction of the true value. Share value should have been split to Re. One.Now , valuable holdings being transferred to a private limited company i.e. Dharmik Commondeal Private Limited not at true value but at book value .


http://www.rareindianshares.info/2012/09/rate-89-paise-per-share-transfer-of-48.html


http://www.rareindianshares.info/2009/06/binani-metals-limited.html

http://www.rareindianshares.info/2011/01/binani-metals-limited-why-face-value.html
http://www.sebi.gov.in/dp/binani.pdf
 http://www.rareindianshares.info/2012/09/treat-non-promoter-monority-share.html


OSCAR INVESTMENTS LIMITED


Of  Religare / Fortis group. Made a fortune by selling Ranbaxy shares. Although listed in BSE ( actively traded ) but no dividend


http://www.rareindianshares.info/2010/09/oscar-investments-limited.html


BHARTI TELECOM LIMITED


On a capital base of around Rs. 21 crore , Bharti Telecom holds around 172 crore shares of Bharti Airtel ( worth around Rs. 53 ,000 crore ). For the financial year 2009 -10 , Bharti Telecom received dividend income of Rs.173 crore which was utilised to buy a further 55 lakh shares of Bharti Airtel . But no Dividend for the share holders of Bharti Telecom Limited


http://www.rareindianshares.info/2011/02/bharti-telecom-limited.html


Others  


NALWA SONS INVESTMENT


http://www.rareindianshares.info/2010/12/nalwa-sons-investments-limited-jindal.html 


CHEMINVEST LIMITED

http://www.rareindianshares.info/2011/09/cheminvest-limited-annual-report-2010.html 
http://www.rareindianshares.info/2011/07/cheminvest-limited.html 

WILLIAMSON FINANCIAL



SIL INVESTMENTS LIMITED ( SUTLEJ COTTON MILLS )


http://www.rareindianshares.info/search?q=sil 

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http://www.suchetadalal.com/?id=175202d7-a5ce-be2f-492fe1477460&base=sub_sections_content&f&t=Essar%27s+Delisted+Saga

http://www.rareindianshares.info/2013/04/nirma-drops-move-to-consolidate-face.html --------------------------------------------------------------------------------------------------------------


On the other hand  there are some progressive and pro- investor investment companies ( whose example all investment companies should follow ).


 


Like 


Bajaj Holding And Investment Limited

Tata Investment Corporation Limited

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HUM MEHNAT KASH ISS DUNIYA SE
JAB APNA HISSA MANGEY GEY
IK BAGH NAHI; IKK KHET NAHIN
HUM SAARI DUNIYA MANGEY GEY
( Josh Malihabadi )
___________________________________________________________________________________--

General Warning : Investment in Shares Can be Injurious to Your Wealth


Disclosure : We have  family holdings in many of the Companies mentioned above


Disclaimer : All comments / facts stated purely in good faith to further the interests of fellow public investors. Please recheck every fact.

NO responsibility with this blog / writer


Cadbury India Limited

We salute all those share holders of Cadbury India who are steadfastly giving their time and money in pursuing the High Court case against compulsory acquisition of shares from remaining minority share holders.

There are around 8,159 remaining non promoter shareholders who together own 2.42% stake in Cadbury India. 


We strongly feel that Government of India and SEBI should amend the laws so that Companies using their " brute majority " are not able to " compulsorily " buy out minority shareholders at what they perceive to be the " fair value " . Delisting may be OK . But a High Court Order for selective share reduction ( of Non Promoter Share holders ) is a different matter altogether.


 1 ) If a company wishes to buy back compulsorily then in the voting procedure the majority holder ( promoter ) should be debarred from voting . Only the small share holders should have the Right to vote on that particular Resolution .


2 ) As in the case of land acquisition , the Company should state valid reasons for acquisition of remaining shares ( In Cadbury 's case the remaining 2 odd  % share holders can , frankly , in no way alter  the Company 's policies.)  Only a few more Annual Reports are to be despatched and a few more chairs at the AGM .  ( Cadbury India Limited 's shares were delisted w.e.f  20-01-2003 )


3 ) There should be a soletium  ( a premium over and above the fair value to compensate for compulsory buy out ) of 50 % 


If the Company feels that the rate it is offering is " FAIR " then it should , also , be willing to offer to sell its entire majority  holding at that rate . The minority share holders ( and other Indian share holders ) should have a Right of Pre emption at that " FAIR " rate. For example if Cadbury India Limited feels that Rs.2000 is a " fair rate " then Indian shareholders in general should be given an opportunity to form a SPV ( Special Purpose Vehicle ) Company which ( with suitable debt equity Leveraged Buy out ) and buy  at the same rate  the majority shares from the Promoters. A period of 6 months should be kept for giving this opportunity to Non Promoter Indian shareholders 


However , we  sincerely wish that Cadbury India Limited offers its remaining loyal share holders " Kuchh Meetha " and in New Year 's " Shubh Arambh " withdraws this move.

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Compulsory Back Back of Shares- Violates Fundamental Right to Equality

Regarding the move , earlier of Cadbury India Limited and , now , by Shakti Met-Dor Limited :-


Compulsory Buy Back of Shares ( selectively from minority Non promoter Share holders ) is violative  of Fundamental Right of Equality enshrined in the Constitution of India

Such a move creates two separate and unequal classes of Shareholders , i.e. Promoter Share Holders and Non Promoter Share Holders .

Please read this very informative Post :-

http://www.legalservicesindia.com/article/article/squeeze-out-of-minority-shareholders-1503-1.html

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For Shakti Met-Dor , please click :-


http://www.rareindianshares.info/2013/05/shakti-met-dor-compulsory-acquisition.html
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Nirma Compulsory Buy Back- Shareholders to Oppose Tooth And Nail

Shareholders of Nirma Limited are determined to oppose vehemently Nirma Limited 's anti small shareholder move to compulsorily buy back non promoters shares @ Rs. 225 ( Rs 5 Paid ).

AGM at Ahmedabad on 23/07/13 , 11 AM

Shareholders are writing their opposition by sending letters , Regd Post , to the Compliance Officer. Later , legal action ( like with Cadbury India and Shakti   Metdor would be undertaken )
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August 15, 2009

Macmillan Publishers India Limited

In a very surprising and complicated legal move Macmillan Publishers Limited has extinguished old Equity Shares and has given its shareholders 3 Options :-

1 ) Cash option of Rs. 69 per Share ( same rate as was offered 6 years ago !! ) 

2 )  Opt for Redeemable Preference Shares    ( RPS ).

3) Continue as Equity Shareholder of the Transferee Company  ( through Macmillan Equity Shares Trust ).( in terms of Clause 18 . 04 )
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Kindly note :-


1 ) The above Options are to be exercised within a period of 60 days from Record Date i.e. before 13 -04-2014

 2 )  The Default Option is No 1 Option i.e. cash offer of Rs.69 per Share

3 ) The Shareholder if he receives a Cheque for Cash Option can return the un encashed cheque with in 30 days and can opt for  other two options i.e. Preference Shares / Equity Shares.

3 ) RTA are Cameo Corporate Services Limited ,

      Chennai

Tel : 044 -28460390 to 28460395
email : investor@cameoindia.com

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Blog Comments : 

It seems the management is desperate to kick out its Equity shareholders at fraction of NAV of Company.

The net worth / prospects  seems to have improved greatly ( please recheck this point independently ) with the merger of wholly owned subsidiary , i.e.Frank Brothers And Company ( Publishers ) Limited with Macmillan Publishers ( India ) Limited  .

3 ) Regarding our holdings in Macmillan Publishers ( India ) Limited we have opted , on immediate basis , for the Equity Option.

4 ) No worry about Liquidity - Please Recheck independently  -( We have Rare Indian Shares site )

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LINK

7 comments:

Rajkumar Mittal said...

Section 100 of the Companies Act permits a company to reduce its share capital in any manner

Banku Bhaiya said...

All the case of reduction of capital will fall flat in the courts since the courts do not interfere with economic policy unless it's found to be arbitrary or illegal and that it's not the function of a Court to sit in judgment over matters of economic policy which must be necessarily left to expert bodies

Section 100 is power enough

Chiman Bhai said...

I dont know if the blog adminstrator is legally literate but please note that in all such of reduction and compulsory buyback cases, court takes note of the general rule that it was the prescribed majority of the shareholders which is entitled to decide whether there should be a reduction in capital or not

Ashwani Kumar Aggarwal said...

Courts are taking into consideration the concerns of Non Promoter Share holders as in the case of Cadbury India Limited.

If the Fundamental Right ( Right to Equality ) enshrined in our Constitution is violated , our Courts would move in. We cannot have two set of Shareholders:- One Promoter Shareholders ( with extra rights and privileges and another Non Promoter Minority Shareholders ( at the mercy of the brute Majority )

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Ashwani Kumar Aggarwal said...

The Majority cannot dictate to the Minority to compulsorily sell their Shares and that too at rates set by Majority Appointed Valuers / C A s.

This is what was done by Cadbury India and , now , being done by Shakti Met -Dor (subsidiary of German giant Hormann Beteilgungs Gmbh )

Delisting may be OK . But forced cancellation of Minority shares is not done even in Capitalism

Capitalism means Demand and Supply.

If the Majority wants the Minority 's shares then , to Quote from Mario Puzo 's Godfather " " They should make an offer we cannot refuse ". Let them approach us and buy at a mutually agreeable price but not at a Dictated Price.

Free will transactions are the essence of Capitalism .

Ashwani Kumar Aggarwal said...

We remember an incident in late 1970 s ( when I was a student in Delhi ) , there was a famous case of a Listed Company where there was allegation of Mismanagement .

Govt. has power to appoint Independent Directors , ostensibly , to safeguard the Interests of Minority ( Public Share Holders ).

Some prominent persons gave Bags of Money to get appointed as Directors.

( High denomination notes had been demonetised ( Rs. 100 , then ,Highest Value ) so ." the Public Interest Directors "had a bit of challenge carting ) .

This was because these Persons knew that in the godowns of the Company were lying large quantities of a chemical which at that time was in acute short supply.

The Directors had calculated that they would recover their " investment " by selling this product in Black