Stripping or Stealing the Listed Company of Assets ! ~ How Promoters are suspected to do it and Auditors suspected to allow it !

You’ve heard of Naked Speculation ! but have you heard of Naked Companies that have been rendered so because they were stripped off their Assets by their Own Promoters  !!!?

Have always known how Indian Corporates ,even some of the well known names, indulge in siphoning off funds and stripping and stealing assets of the companies they have promoted or taken over !

In fact this reality is well captured in the tagline for my blog  ” In India,Companies may fall sick but Promoters rarely do !”  

But this one takes the Cake !  ~ the Kolkata based Listed Company Vikash Metal & Power ~ Business Standard highlighted this in it’s edition yesterday ~The great Indian listed firm robbery

Vikash Metal & Power says on April 12,2012, it lost a building and other stuff worth Rs 90 cr to an “incident of robbery” and auditors have simply remarked that the Fixed Asset Registers were not shown to them  rather than raising deeper questions on this ! ~ the thieves also took away the registers where the company had recorded the details of its fixed assets ! ~ Wow ! ~ and I checked it was a Thursday ! when this ‘Immovable Property’ was ‘Moved ‘!

The Company has been promoted by the Patni Family ~Father Vimal Kumar Patni and sons Vikash Patni and Akash Patni.Their stake has dropped from 59% to just 15.06% as at December 31,2012 ~ all pledged.

The Share Price of the FV Rs 10 shares is just 54 paisa !

The Patni family was also the Promoter of another  listed firm, Impex Ferro Tech. In fact Vikash Metal & Power was shown as part of the Impex Group.Till December 31,2011 the Promoters Group shows these Patnis ~ but no longer so from then ~ The Share Price of Impex is Rs Rs 3.54 for a FV Rs 10 share

Clearly this has the making  of a massive Fraud here ! ~ Stealing with a Legal Tag !? ~ that’s the Substance over Form !

Some other ways of suspected siphoning of Funds or Assets from the Company are as below with links to Company  illustrations which I had extensively blogged on recently

  1. Writing off Fixed Assets as Impaired and Value not Recoverable ~ Goldstone Infratech  May 22nd, 2013
  2. Writing off Inventories stating it was a correction in erroneous valuation earlier  and reducing  Debtors outstandings  as being overstated as found out in a reconciliation and not found to be realisable !  ~Bhoruka Aluminium June 8th, 2013
  3. Using the Free Cash for Investments in Group Companies or extending Loans & Advances to Them ~Geodesic March 27,2013
  4. Inflating Project Costs & Expenses ~Reliance Industries  October 3rd, 2012

Shortly I shall also reveal, with clear financial evidence how the Promoter & Top Management lied and mislead, what I strongly suspect how the Vedanta Sterlite Group took the Minority Shareholders of Sesa Goa for a ride by Investing over Rs 12000 crs of Sesa Goa’s Free Cash in Cairn India stating it would be immediately EPS accretive ! ~ it has just received Madras High Court Approval to merge Sterlite into Sesa Goa now to make it Sesa Sterlite !

Even reputed Multinational Parents like Holcim  @ Unilever,in my view, have just played hokey pokey with the Minority Shareholders of Ambuja Cement and HUL !

If you think RBI,SEBI,MOF and MOCA and Company Law Board even Stock Exchanges are really effective authorities to keep the checks and balances in our Capital Markets and protect Minority Shareholders ~ then think again !

Where Big Monies and even Survival  are at Stake ,there will be Stink !

What’s Integrity to an Opportunity !? 

7 thoughts on “Stripping or Stealing the Listed Company of Assets ! ~ How Promoters are suspected to do it and Auditors suspected to allow it !

  1. I also have been through such companies. That Arrow Securities [New Name: Safal Securities] where the the company did not follow Stock Exchanges filing & was all of a sudden in Dec’2011 the company got listed at a price of Rs.50 & continued upper circuits till Rs.85 & in between I had given the certificates to transfer on my name [which I was unable to do bcoz the co. go delisted from exchanges] I was surprised with the reply from co. that it issued the said shares to some other person. I claimed that I had the purchase bill of 1995, the ledger copy of the purchase the broker confirmation of purchase & also the original share certificates but still it says they have issed it to someone else & when I asked to show me the indemnity from the person to whom the certificates were transferred I was told to send my original certificates to verify & that also not through the registrar but directly to the Registered Address of the company. I had taken the entire matter to SEBI & BSE Investor Greviance with all the proofs in Original but still SEBI says we cant help. These people just file the complaint for the sake of filing but even if the company will reply that we cant answer the query they would just close the complaint saying that the co. has given a reply & the said case is resolved.
    The height of the case was I had even informed the SEBI that the Promoter is himself buying the physical shares from the market through the website then they they were simply not ready to investigate the issue & over & above that they told me that we are going to create a seperate window for many of such companies from Gujarat have been involved in such frauds. But even after presenting all the evidences they are simply sitting in their Air Conditioned Office & getting Paid for just talking to Investor & Simply not taking any action.

    If the SEBI works like this then they are inspiring the thieves to do wrong & do such Scams like Long term Gains & short Term Loss & Evade Taxes.

  2. We should also include Yash Birla group companies.

    Zenith Birla raised money though IP at 22 per share and also through GDRs, now trading at just 1 rupee/share. Company says they are UNABLE to use IPR/GDR proceeds since market conditions have changed.

    Should not they return money to shareholders. Instead they have siphoned money to several loss making group companies?

    SEBI’s reply to a complaint about Zenith Birla stated ‘company has reported as required – case closed’. Whom do we take such complaints?

  3. I work in Software field … but through my Brother I heard of lot of mungerilals who talks like “iss scrip mein game chala raha hai”, “bada haath yeh scrip ko 3 mahine mein 20 se 200 jane wala hai”. While talking like this they feel like Kathrone ke khiladi, Smart Person who knows lot of secrtes of stock market, Person-Who knows how stock market moves etc. But at the end they turned out to be stupid.
    Better thing if don’t want to spend whole time in tracking market, is to follow someone to whom u can trust likes of Sanajy Bakashi, Gaurav Parikh, Basant Maheshwari, Sanjoy, Damani, Ramdeo,etc OR buy good corporate governance stocks like Godrej, Murugappa, Sundaram, Tata, M&M,HDFC, Bajaj, Kotak etc

  4. (1) First of all Iam disappointed by the way these TV business channels work. They cant even spare few minutes a month to bring such manipulations/ frauds by promoters affecting minority shareholders. Why cant they dedicate half an hour month for minority share holders and corporate governance cases. They will go to Europe to interview somebody who sits in their next building…

    (2)SEBI is working like a post office. It takes investors complaint, sends it to the company . The company replies something. SEBI disposes off the case without using its brain or performing a basic check if the answer by company resolves the question raised by the investor.
    The need of the hour is to categorize the complaints which SEBI receives and how is tracks them. The complaints should be classified into broadly 2 categories ( a) Complaints affecting individual shareholder – Non receipt of dividend, annual report , share transfer etc (b) Complaints affecting minority shareholders as a whole or group of share holders

    Instead of wasting public money in Investor Protection and Eduction Fund in some stupid seminars which nobody benefits, the SEBI should use it to setup a professional body ( or outsource it to some other organization) who can actually look into the complaints in category (b) above.
    If there is a NGO or a professional volunteer group who can work together to bring together aggrieved shareholders of such companies and take up the cause it will be of great help.

  5. Excellent Replies by all of you ~ Bhupesh,Phd under our FM ! ~ Kushal,Kris and RR completely agree with you that SEBI is not fully effective in addressing such Issues systematically so such promoters and companies dont get away ~ nice observation RR that it seems to work like a Post Office ! and the Media channels thrive on advertising and sponsorship revenue from the Corporates,so dont expect them to thram these corporates ! ~ but they must have an accounting and annual report exposure program that will serve a s a caution ~ and Sameer you are being most kind,thank you

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