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CNI Research reveals ‘vanishing cos’ scam

23 January 2013

statesman news service
MUMBAI, 23 JAN: A report prepared by CNI Research Limited has uncovered a major scam focusing on how over decades numerous de-listed companies had collectively robbed retail investors of their precious investment aggregating over Rs 61,000 crore.
A study of more than 1,450 companies ~ in stock exchange parlance called “vanishing companies" ~ suspended by the Bombay and National Stock Exchange for violation of listing regulations during or before 2009 revealed that the bourses do not have details of 574 defaulting companies. Of these 536 were suspended by the BSE and 38 by the NSE. The report has been prepared on whatever details of irregularities committed by the rest of de-listed companies.
The CNI Research says: “The Rs 61,000 crore figure arrived at was based on available information and there is possibility that the actual losses to retail investors could be more than Rs 100,000 crore. If this sum is correct, then it should be one of the biggest scandals ever uncovered in the country. This also raises serious questions of accountability factor as to who is responsible for investors' losses.
The companies de-listed or suspended by BSE or NSE, it is found, have willfully violated the terms and conditions of listing. Considerable time has lapsed since these companies had been suspended which suggests this could be one of the backdoor routes for “seeking” de-listing where promoters sell their shares in the open market and follow it with violation of agreement with either BSE or NSE incurring a deliberate suspension.
The common feature in most of these cases had been promoters, before committing willful violations, sold their entire stake. The study shows, following the punitive action by BSE or NSE the promoter had hardly 0 to one per cent stake in his/her name.