Investor Issues
Disclosure standards on the decline; investors left to figure out things on their own

Companies are beginning to skimp on disclosures to their investors, showing that transparency is on the decline and a concern for investors

Kotak Institutional Equities (Kotak) has pointed out that disclosure standards of Indian companies are going down and has provided two examples from the September quarter results: Axis Bank and Shree Cements. Regarding Axis Bank, Kotak stated, “Axis Bank did not provide details of fee income as it did historically. We note that Axis provides the maximum disclosures on fee income though it is not obliged to share such details as per listing requirements.” While, it is not mandatory to disclose fee breakup, they have skipped on such a practice for the first time. Even though fee income did rise, which surprised investors, the more surprising fact was the departure from maximum disclosure practice, which lends some credence on good corporate governance. Whether they will disclose fee breakup next quarter remains to be seen. A table of the details of retail banking split up is not provided as shown in table below:


Similarly, Kotak noticed that Shree Cements too skimped on providing disclosures that would be beneficial to the investors. It said, “Shree Cements did not provide details of cement sales volumes, which it used to provide historically (until the fourth quarter of the 2012 fiscal year). The company is not obliged to share this information but sales volume is basic data for investors and analysts to appreciate a company’s financials better.”

While these are not major infractions (as no law was broken), the bridge between the corporate and retail investor—trust—is now on the wane as companies choose to skimp on voluntary disclosures.

Disclosure is one of the main ingredients for a healthy capital market system and is of paramount importance if retail investors are expected to invest in large numbers. As transparency increases, so does trust. Unfortunately, this isn’t happening and Moneylife has pointed out this several times in the past. The retail investor base has dwindled to such a large extent (check our position paper on retail investment) that SEBI has resorted to half-hearted measures to woo back retail investors, especially through the so called disclosure-based regime, which has yielded little benefits because there’s no protection for the retail investor.

We had written a cover story on transparency in IPOs a long time back, in 2008. Furthermore, the lack of transparency in pricing in IPOs, especially public sector IPOs, in India has left investors cold and turns out to be a loser’s game. More pertinently, one of the biggest companies, Reliance Industries, had failed to disclose about material information about the steep decline in the output in its KG-D6 block, which has hurt investors. Our columnist R Balakrishnan had written an article about accounting standards and disclosures, here, which has been on the decline as well.

Poor quality disclosures are not confined to just the equity market. There are questions over the Insurance Regulation Development Authority’s (IRDA) soon to be announced guidelines on insurance company IPOs. Ashvin Parekh of Ernst & Young, had said, “Disclosures for profitability of different product lines should have been made long ago. It would have helped not just for IPOs, but also for corporate governance. But the regulators have already missed the boat by seven to eight years.” You can read more here.

All investors should be worried about the level of corporate governance. This makes it a lot harder for investors to make informed decision based on qualitative information.



“Siachen Track II Forum” on a treacherous trek

The Track II strategy is a conspiracy hatched by Pakistan to make its sinister scheme appear transparent, non-partisan and credible, to evict Indian troops from Siachen which Pakistan desperately needs but cannot snatch it from India by force


Having suffered several defeats and dismemberment at India’s hands, Pakistan should seek peace more eagerly than India. Ironically and illogically, however, it is India that has always been at the receiving end while Pakistan has been getting away with her audacious mischiefs, outright anti-India tirade and perpetrating attacks deep inside India through proxy squads of terrorists trained, equipped and financed under a well organised military system. At last count, over 42 training academies—more mildly called ‘Camps’—are currently running in Pakistan and POK (Pakistan Occupied Kashmir) even when, in a grotesque development, some of India’s very own revered strategists including a former Air Force chief have been easily convinced by their Pakistani counterparts to coax the Indian Army to depart from Siachen as a step towards peace. Called “Track II Forum”, they are a group of retired military brass from Pakistan and India seeking ‘demilitarisation’ of the Siachen Glacier, the world’s highest battlefield, held by Indian troops since 1984. Ever since, the Pakistan Army has tried to dislodge the Indian troops and capture Siachen but in vain.

Or is it the other way round? Prime minister Manmohan Singh was once quoted in India Today (14 May 2012) thus: “Siachen is called the highest battlefield where living is very difficult. Now the time has come that we make efforts that this is converted from a point of conflict to the symbol of peace.” The report went on, “Sources in the government say the prime minister has endorsed the Siachen talks on demilitarisation. For him, they say, the world's highest battlefield—and a snow-capped symbol of the Indian Army’s enduring sacrifice—comes without the baggage of Jammu and Kashmir and forward movement (read demilitarisation) would mean creating the right atmosphere for talks derailed by the 26/11 Mumbai terror attacks. Demilitarisation is his CBM (confidence building measure) offer to Pakistan.” The Indian military viewpoint has always been unambiguous and steadfastly against any ‘demilitarisation’ of Siachen. The government, in all fairness, must respect and accept this professional opinion from the country’s military authorities responsible to defend these borders rather than yielding to pressure or blackmail from invisible quarters. 

What is perplexing is that the proposal to demilitarise Siachen is said to have germinated in secretive parleys among some very senior military veterans—Indians and Pakistanis—organised as “Track II Forum” under the aegis of “Atlantic Council of Ottawa” and “Atlantic Council of US” (latter headed by Shuja Nawaz—a close confidant of Gen Kiyani) at exotic locales in the world. The Forum flaunting themselves as angels of peace, promise to replace animosities and the age-old trust deficit between India and Pakistan with peace, friendship and cooperation. ‘Demilitarisation’, a euphemism for ‘withdrawal’ or ‘abandonment’ of Siachen by India, is the first step they have proposed while remaining quiet on far more serious issues affecting daily life of millions of people on both sides of the border.

Siachen, at an altitude of 22,000 ft, has nothing to sustain life. All it has is scarce oxygen, chilly winds, icy gorges, debilitating fog, sleet, snow and temperature sinking to minus 50 degree Celsius. No birds fly there, no plants grow, no flowing streams—only frozen glaciers, no life whatsoever! Yet, the gallant Indian soldiers stand here to keep vigil throughout the glacial expanse in sheer defiance to nature and enemy. Even in these adversities, Indian troops holding these dominating heights enjoy a tactical advantage which renders it impossible for the Pakistan Army to wrest control of “key terrain features” in this area by fighting. But Indian occupation of these features denies Pakistan Army the freedom to encroach into Indian territory and stake claims subsequently as is evident by Pakistan’s persistence on delineating the LC (Line of Control) from NJ 9842 to Karakoram Pass. The Track II ‘demilitarisation’ proposal, therefore, is Pakistan Army’s silent attack by other nobler looking means to capture the strategically important objective in the region. If this were not so, why are they ignoring to address a host of other higher priority issues hampering normalisation process? Siachen being a desolate uninhabitable tract has no bearing on trade, industry, transport or any other human activity to affect life in Pakistan. Why then is it given such a prominence for normalising relations between the two nations?  Since early 2004, even the opposing forces of the two countries have remained largely quiet in this region. Why should a quiet, tranquil Siachen be a cause of anxiety to Pakistan at this stage? Far from being an innocuous peace drive, the move is loaded with Pakistan’s strategic move to unhinge and upturn Indian defences in the region without military manoeuvre.

The vital strategic significance of Siachen is further heightened when viewed in relation to the LC that should justifiably run north from NJ9842 to the vicinity of the Wakhan Corridor, the western extremity of the original state of J&K ceded to India by the Maharaja genuinely and legally, as also the proximity of Shaksgam Valley illegally ceded by Pakistan to China.  

Also, it is the strategic value of these dominating heights that stand between a Pak-China link-up.  There are rumours that part of upper Gilgit-Baltistan has been leased by Pakistan to China for a period of 50 years.  Presence of Chinese troops and labour in the Baltik region lend substance to these inputs. Imagine a geography that would conjoin Xingjiang, Shaksgam, POK (Baltistan), Aksai Chin and Tibet while Siachen is left bereft of Indian troops. If and when that happens, it would be tantamount to ceding areas north of Khardung La range to Pakistan putting life in the Nubra and Shyok Valleys at their mercy and opening floodgates for unhindered infiltration into Ladakh. Indian positions in Ladakh, Leh and Kargil would also be under serious jeopardy. Siachen in its present state stands formidably to deny Pakistan and China such strategic advantages besides asserting India’s sovereign authority over her territory in the region where border, LC or AGPL (Actual Ground Position Line) is yet to be authenticated.

If they were indeed promoting peace and friendship between India and Pakistan, there were other urgencies and priorities that should have caught the attention of Track II Forum. Siachen is not harming Pakistan in any way yet, whereas the terrorist training camps in Pakistan have been bleeding India. The Forum is strangely quiet on this issue. Why are they also not asking Pakistan to expatriate the terrorists and criminals wanted for their crimes in India and now roaming about freely and honourably in Pakistan? Why are they not seeking an undertaking from the Pakistani authorities to stop anti-India tirade at international forums?

If ‘demilitarisation’ of Siachen were logical and prudent in the Track II reckoning, there would be no logic or prudence for India to hold geographical features anywhere along the Line of Control by the same reckoning. With in-house calls for withdrawal of Armed Forces Special Powers Act from J&K already gaining eloquence, it is not impossible to foresee that vacating Siachen would ultimately trigger a demand for the Indian Army to ‘demilitarise’ J&K. By that corollary China would perhaps be the first to seek ‘demilitarisation’ of Arunachal Pradesh. It seems Track II Forum has big future and can plan their exotic jaunts in style!

Some Indian delegates in the Track II Forum are ducking questions and, bereft of argument, some of them brazenly conclude saying, “Siachendemil... it is my personal opinion? You may agree or disagree with it but in my retired capacity, I am free to express whatever I feel!” That is sad and grossly wrongly held notion. Agreed that retirement frees you from the rules and norms that restricted your “free and frank” expression, but the position you held before demitting office has given you an identity and status that conveys credibility and influences public opinion.

Personal opinions of personalities who become publicly recognisable should not be loosely tossed around under the plea of one’s fundamental rights. Even on retirement, military leaders cannot relinquish in life their commitment to “the safety, honour and welfare” of their country and violation of this Chetwodian virtue should be viewed most seriously. The Track II proposal to ‘demilitarise’ (which actually means abandoning) Siachen is not only wrong but a treacherous proposal that smacks of some conspiracy hatched to inflict significant damage through apparently innocuous means and cunning machinations.   

Ideally, entire the Indo-Pak border and Line of Control/Actual Ground Position Line should be demilitarised. Maybe one day it will happen too. Perhaps by now both the countries would have achieved such good neighbourliness only if Pakistan had not betrayed India’s trust every time we moved closer to peace and friendship. Given the history of frequent betrayals, infiltration, cross border terrorism and Kargil, India would vacate Siachen at her own peril. Pakistan cannot afford to evict the Indian Army from its dominating positions at the Earth’s highest battlefield militarily. The Track II strategy therefore is a conspiracy hatched by Pakistan co-opting Indian veterans and journalists under the aegis of so-called Atlantic Council of Ottawa to make their sinister scheme appear transparent, non-partisan and credible to evict Indian troops from Siachen which Pakistan needs desperately but cannot snatch it from India by force. An army that is used to planning and executing coups to topple governments seems to have also perfected yet another art of launching quiet warfare in the garb of cool diplomacy to evict the Indian Army from its defences! It is therefore highly expedient for the India Army to consider and include such unconventional machinations and “diplomatic manoeuvrings” as factors while planning war-games to be able to see beyond what looks apparent in our enemy's posturing. 

Peace and good neighbourly relations between India and Pakistan or between India and China are very much needed and would be a welcome scenario any day. Sadly, these relations have been far from peaceful or good neighbourly with a history of more blood flow than trade and trust across borders. India’s initiatives for peace and friendship with Pakistan have almost always been betrayed even while agreements were being drafted or formally signed. Prime ministers Vajpayee and Nawaz Sharif were celebrating peace at Lahore when the Pakistan Army was busy infiltrating to capture Kargil and cut off Siachen. Peace parleys for confidence-building measures were going on between the two countries when Mumbai 26/11 killings happened under the aegis of Pakistan Army/ISI. Yet, people on both sides of the border need and deserve peace and there is ample scope for cooperation to benefit from each other in numerous fields. 

But peace cannot be begged. To be lasting, it has to be negotiated from a position of strength, honour, dignity and mutual trust.

To read more articles by the same writer, please click here.


(Col Karan Kharb is a military veteran who commanded an Infantry battalion with many successes in counter-terrorist operations. He was also actively involved in numerous high-risk operations as second in command of the elite 51 Special Action Group of the National Security Guard—widely known as ‘Black Cat Commandos’. He conducts leadership training and is the author of two bestsellers—“Made to Lead” and “Lead to Success”—on leadership development that have also been translated into foreign languages).



major mehandru

5 years ago

The tragic truth is our politicians and babus refuse to learn from on experience or say history .Even after courting disaster in 62 , messed up the chance to amalgamate Bhutan in 64 ,messed up 65,71,91 and are pressing on regardless ,to fool around ith highly tech and professional defence responsibility.We ill never be able to save our honour till the job is handled by professional soldiers. mehandru

IDFC League 1 Fund: What should you expect?

Another close-ended scheme investing in mid-cap stocks. What are the risks?

IDFC Mutual Fund plans to launch a five-year close-ended equity mutual fund scheme—IDFC League 1 Fund. The scheme would invest in equities and equity-related instruments of companies outside the top 300 companies by market-capitalisation. The scheme would invest 65%-100% in equities while the rest would be invested in debt and money market instruments. The performance of the scheme would be benchmarked to the BSE 500 index. Investing primarily in small- and mid-cap stocks, putting your money in this scheme with no exit route could be risky.
Recently Union KBC Mutual Fund filed its offer document to launch a unique close-ended equity scheme, Union KBC Trigger 50 Fund (Read:Union KBC Trigger 50 Fund: A Different approach, but is it worth the risk?). This was, however, just a three-year close-ended scheme. We had pointed out that three years is a short time to invest in equities as the markets can behave in a very erratic manner in a three-year time frame and worse still you could be withdrawing your investment at a loss. IDFC League 1 Fund has opted for a longer period, but still, withdrawing your investment at a predefined time can be risky. 
Since this is a small- and mid-cap scheme, it is important to see how similar schemes have performed in the past. Over the last quarter ended September 2012, small- and mid-cap schemes were the best performers in terms of returns (Read: Moneylife, issue dated: 1 November 2012—Best Equity Funds in the September '12 quarter). These schemes normally do well during a market rally, but you should be aware of the downside risks as well. In FY09-10, when the Sensex grew by 70%, from 10,000 to 17,000, such schemes with a similar investment objective performed really well. Birla Sunlife Small and Midcap Fund gave a return of 141% and DSP BlackRock Small and Midcap Fund followed closely with a return of 139%. However, for the calendar year 2008 when the Sensex crashed to half its value, in the same period the CNX Midcap index fell by 59%. Funds like Birla Sun Life Small and Midcap Fund and DSP BlackRock Small and Midcap Fund fell by 61% and 58%, respectively.
Since the performance would be benchmarked to the BSE 500, how has the index performed in five-year periods? We calculated the five-year monthly rolling returns of the BSE 500 from January 2001 to October 2012. On an average, the index has returned 21.68% compounded annualised over the 94 periods. The minimum return has been 0.94% and the maximum return has gone up to 49.88%. In 71 five-year periods out of 94, the index has delivered a return greater than 10%. A lot depends when the investment was made. Had you invested in October 2007, at the end of five years your investment would have grown by just 0.94%.
The minimum investment amount that would be accepted would be Rs5,000. This being a close-ended scheme, facilities like Systematic Investment Plan, Systematic Transfer Plan and Systematic Withdrawal Plan are not available to investors and no redemption or switch out of units shall be allowed prior to the maturity of the scheme. Unit holders who wish to exit may do so through the stock exchange mode. The scheme would charge up to 2.70% of the daily average net assets as fees.



Suiketu Shah

5 years ago

If one is a longterm investor ,best to puit in FD's and good shares like HDFC Bank,RIl,etc.Dump MF .

We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)