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Moneylife » Investing » Regulations » Are companies withholding information from the stock exchanges?

Are companies withholding information from the stock exchanges?

Moneylife Digital Team | 02/03/2012 05:24 PM | 

Media reports are not always the source of trouble for the company. But why are the exchanges not taking any action to curb such reports?

The saga of companies, denying price-sensitive media reports continues and since the bourses merely act as post offices, investors remain clueless and confused. In a single day on 2 March 2012, the National Stock Exchange (NSE) reported these corporate clarifications in its daily press release. Here is the upshot:

On 1 March 2012, Economic Times reported that Pantaloon Retail plans to exit the joint venture with Staples Inc. It had the photograph of Kishore Biyani, CEO of Future Group and it said quoting him that Pantaloon’s exit from the joint venture with Staples is part of the group’s strategy to raise funds and focus on fewer yet scalable businesses such as food and fashion. Mr Biyani added, “We are looking at exiting such non-core business, including joint ventures.”

Following the report, the NSE sought a clarification from the company. Pantaloon Retail (India) stated, “We deny any such transaction at this stage. We shall inform about any firm and binding decision no sooner approved by the board, to the regulators and our shareholders, as required by law.” NSE has dutifully posted this response. So, whom does the investor believe?

The press release was an anti-climax and Pantaloon Retail (India) was trading on the Bombay Stock Exchange (BSE) at Rs181.50 (0.06% down from the previous close). The 52-week high and low for the share price was Rs364.15 and Rs125.30, respectively. The share price is stable and well away from both the 52-week high and low. Shouldn’t the NSE at least report this to SEBI (Securities and Exchange Board of India)?

Another case is that of Bajaj Finserv. The NSE saw a media report of Bajaj Finserv planning to buy Fidelity India's mutual fund business. The NSE sought clarifications from Bajaj Finserv and it gave a press release which read: "We wish to inform you that as of now, we have no such proposal under consideration." The Bajaj Finserv share price is at a stable Rs633.30 (0.2% down from its previous close).

In both the above cases, clearly the investors are left clueless. So, were the media reports baseless? The first report even quoted the promoter. There is a strong case that companies are withholding information from the stock exchange and consequently from the public.

Media reports are not always the source of trouble for the company. Nuchem was questioned by the NSE for non-compliance with certain provisions of the listing agreement. The company could not provide satisfactory replies to the queries raised. The NSE press release read: “The equity shares of Nuchem will be suspended from trading with effect from 12 March 2012 (i.e. closing hours of trading on 09 March 2012) until further notice on the capital market segment of the National Stock Exchange of India for non-compliance with certain provisions of the listing agreement”.

In this case, there is no protection for the investor from volatility in the share price. The NSE has said that trading itself is suspended.

We have to wait and see how the NSE and BSE supervise listed companies and how the companies dodge the investors by withholding information from the stock exchanges.


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3 Comments
Nagesh Kini FCA

Nagesh Kini FCA 2 years ago

MCA, SEBI, RBI are all toothless tigers that neither growl nor bark, leave alone biting. They only indulge in frivolous exercises like suppressing or pulling up Veritas type reports when they ought to have suo moto investigated the irregularities.
I'd like to know what they have done with the auditors' qualifications in Kingfisher accounts, DLF for aggressive accounting.
BSE/NSE are equally at fault for not initiating action against the big guns even when blatant corporate governance misdemenours are pointed out.
What about the fudging by PwC - SEBI/RBI will coolly pass on the buck to ICAI who as usual will come out with face savers as they are mortally scared of the Big 4!

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arun adalja

arun adalja 2 years ago

i have come across lot of controvercies what listed companies are doing without knowledge of exchanges and other regulating bodies.exchanges take care when they come to know such things by the time damage is already done in the price of shares and loss to the investors.media channels are doing the same thing by telling information from sources.

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Nagesh Kini FCA

Nagesh Kini FCA 2 years ago

I've yet to see DLF response to the Veritas Investment Research report or any from SEBI/ICAI on "aggressive accounting approved by auditors,perpetuated and aided by investment bankers" more particularly when the stock, that has a 12% weightage in BSE Reality Sector Index, tanks on both the BSE and NSE.
Are the so-called Regulators still sleeping?

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