Suspension of scrips, or delisting them, punishes investors and helps companies who want to ditch their retail shareholders after raising funds from them
After Moneylife wrote earlier about some 1,500 scrips being in suspended animation, even as the Securities and Exchange Board of India (SEBI) is set to tweak the takeover and delisting rules, intermediaries and investors are writing to protest the lack of action.
Suspension of scrips, or delisting them, punishes investors and helps companies who want to ditch their retail shareholders after raising funds from them. Companies merely need to violate the listing rules by refusing to pay the fees or making correct disclosures. Meanwhile, investors are stuck. They continue to pay the annual depository charges and cannot even close the DP account without transferring the shares; re-materialising them involves a further cost on what could be a worthless share.
An intermediary told Moneylife that, at present, of the 1,537 scrips suspended from trading, just 673 companies account for a combined equity capital of Rs14,119 crore. Virendra Jain of Midas Touch Investors Association says that nearly 800 companies file returns regularly. But, in most cases, investors are clueless.
Among the scrips that investors say they are clueless about are: Assambrook Ltd which was suspended on 3 July 2008 where around 8,000 investors, who hold 64% of the equity, are affected. While tea companies are doing well, shareholders of Assambrook are stuck with illiquid stock even though the shares were trading at Rs15 when it was suspended. Two others are: Delhi-based Talbros Engineering and Cochin-based Vysali Pharmaceuticals.
Interestingly, investors have repeatedly taken up this issue with CB Bhave, even when he headed the National Securities Depository Ltd (NSDL), but have not made much headway. One reason may be that most of these scrips are listed on the (older) Bombay Stock Exchange (BSE), whose turnover has steadily shrunk over the past 15 years to just under 4% of the total market, even though it has more than 3,000-odd shares listed on it with negligible trading. Clearly, it is unfair, and expensive, for the BSE to bear the cross for legacy issues. The regulator needs to step in on behalf of investors and make investor protection funds available to pursue these companies, initiate action against directors (one committee had suggested barring them from the boards of all companies) and file winding-up proceedings against the companies. Meanwhile, several investors and intermediaries have innovative ideas to revive trading in these scrips, if only the regulator would listen. One suggestion sent to Moneylife is to transfer these shares to one of the 20 defunct regional bourses which can provide an over-the-counter (OTC) platform to trade the shares and give them liquidity. These would be like the bulletin boards or pink-sheet exchanges that exist abroad, with lower regulatory requirements. Clearly, this and other suggestions need to be examined by the regulator to find a solution.
Healthcare costs are galloping and health insurance, the supposed solution, is getting too expensive, erratic and unreliable. What should you be doing?
For middle-class Indians, the cost of decent healthcare has been galloping at the rate of 20% per annum, more than three times the general inflation level. Health insurance, which was seen as the answer to their problems, is getting too expensive, erratic and unreliable.
In recent months, public sector insurers have gone to war with expensive hospitals by scrapping cashless facilities on the grounds of massive overcharging. They are also at loggerheads with their TPAs (third-party administrators) for allegedly colluding in the cost escalation. Higher repudiation of claims has become another worry for the consumer. Squeezed by the pincers of poorly-sold group insurance and fraudulent hospitals and TPAs, insurance companies are bleeding. They are reacting by cutting down and withdrawing options and policies and rejecting claims. Worse, despite the best efforts of the regulator, the Insurance Regulatory and Development Authority (IRDA), the redressal of complaints has been slow and inadequate. Added to this confusion is a huge cloud of ignorance on the part of most people, making them perfect targets for mis-selling.
Your medical insurance options are becoming fewer. What should you do to safeguard your interest?
Moneylife talked to a wide cross-section of people to understand the issues - from the perspective of the insurers as well as the consumers. We find that there are no easy answers and the situation will remain chaotic for a while. You need to understand all the issues; have modest expectations; be careful about what you buy; and, most importantly, build safeguards outside the insurance system, because the system will continue to throw up nasty surprises. For starters, there is no option but to understand the current state of the insurance business to interpret the recent events and to know what's coming.
Insurers are bleeding. How will that affect you?
Rohan Dukle, director of Magus Corporate Advisors Pvt Ltd, an insurance claim consultancy firm, says, "The total de-tariffing of the non-life insurance post-2006 (from 1 January 2007) triggered major price wars in hitherto profitable segments such as fire, engineering (insurance), and so on. There is increased pressure on bottom lines; this, coupled with the lower ceding commissions, has forced insurers to reconsider pricing. This pressure is not expected to reduce anytime soon because of the constant influx of new entrants into the non-life segment."
Sudhir Sarnobat, co-founder and director of Medimanage Insurance Brokers, believes that, "Healthcare insurance costs will go up in the next three years because private insurers need to make profits." He also points out that the costs are increasing for healthcare providers, like the cost of land, the latest medical equipment and high-calibre manpower. He estimates a 15% increase in insurance premium every couple of years.
Cutthroat competition has led to insurers offering ridiculous terms to grab business volume (like group insurance from corporates) and this has resulted in losses. The extent of competition is evident from the reports of the Comptroller & Auditor General of India for 2006-09 which show that the four PSU insurance companies suffered a loss of Rs417 crore on individual portfolios and a loss of Rs622.49 crore on group policies. So aggressive was their pricing of group insurance that three top Tata group companies -TCS, Tata Motors and Tata Power - preferred to buy insurance from public sector providers rather than from their own group entity.
Finally, false and fraudulent claims were widespread, especially because of the industry practice of handing over claims processing to TPAs. "Insurance companies have been witnessing inflated, fraudulent, and unwarranted claims from some hospitals,"
M Ramadoss, CMD, New India Assurance, told Moneylife.
All this has led to a major backlash. Things have reached a point where there is no alternative to increasing premiums; simultaneously, appropriate solutions are also being worked out. Segar Sampathkumar, deputy general manager, New India Assurance, tells us that it is impossible to cross-subsidise the costs of group health insurance that are escalating at 30% to 40% per year. Insurers are also prescribing caps to certain specific covers and co-payments, leading to shrinkage in the overall cover. In short, be prepared to deal with insurance providers who are under a lot of pressure and who will, therefore, try to get away by being nasty.
Earlier, insurers followed the policy of "pay if you can, reject if you must"; they now have a policy of "pay if you must, reject if you can." Nagesh Kini, who has been an auditor of insurance companies, says, "The aam aadmi has no alternative but to fork out ever-increasing insurance premiums." He believes that all insurers have "resorted to grossly unfair practices, such as refusing covers, imposing unreasonable loads, hiking premium rates, withdrawing/reducing benefits, rejecting, delaying and/or resorting to ham-handed deductions, or disallowances from claims lodged without assigning valid reasons."
(This is the first part of a two-part series)
The local market is likely to see a flat-to-positive opening today. Wall Street settled mixed on Friday as investors took a breather after the recent gains on good earnings reports. Markets in Asia were trading mostly higher in early trade today as Group of Twenty (G20) leaders asserted their willingness to calm the currency turmoil, which is hurting the global recovery. The SGX Nifty was up 18 points at 6,105 against its previous close of 6,087 on Friday.
Besides global cues, corporate earnings reports will also guide the Indian market today.
The Indian market ended flat in the week ended 22nd October, after a two-week losing streak. Global cues, quarterly earning figures and fund flows towards the mega Coal India Ltd (CIL) initial public offer (IPO) led to volatile trading throughout the week. The market settled in neutral territory with the Sensex logging gains of 40.81 points and the Nifty adding 3.40 points in the week.
The US market ended mixed on Friday as investors took a breather after the recent gains on good earnings reports. Marketmen waited for the outcome of the two-day G20 finance ministers meeting, which was due to be announced on Saturday. Meanwhile, an economist at Goldman Sachs on Sunday opined that Federal Reserve might purchase $2 trillion of assets to stimulate the US economy in its meeting on 3rd November.
The Dow fell by 14.01 points (0.13%) to 11,132. The S&P 500 added 2.82 points (0.24%) 1,183. The Nasdaq rose by 19.72 points (0.80%) 2,479.
Markets in Asia were mostly in the green after the G20 leaders stated that they would take steps to calm the currency turmoil. Despite any concrete plan, the statement increased investors’ risk appetite. On the other hand, Japan’s exports grew at the slowest pace this year in September, increasing pressure on the government to step up stimulus initiatives. Overseas shipments increased 14.4 percent from a year earlier, the finance ministry said in Tokyo today.
The Hang Seng was up 0.74%, Jakarta Composite was up 0.27%, KLSE Composite was up 0.21%, Straits Times was up 0.46%, Seoul Composite was up 0.45% and Taiwan Weighted gained 1.17%. The SGX Nifty was up 18 points at 6,105 against its previous close of 6,087 on Friday.
The deal to reform the International Monetary Fund (IMF) to give greater clout to developing nations like India and halt aggravation of the ongoing currency war was struck at the last moment at the conference of G-20 finance ministers and central bank governors in South Korea.
The uncertainty continued till the last minute and it was only in the wee hours of
Sunday that officials, after intensive overnight negotiations, managed to put together a communique that was acceptable to all 20 countries.
Till this (Saturday) morning, the situation was really uncertain. It was clinched in the meeting of G-7 and BRIC finance ministers," Indian finance minister Pranab Mukherjee told reporters.