Helios and Matheson Information Technology, exposed several times by Moneylife for its dubious operations and failure to pay term deposit holders is at last being delisted from the Indian stock exchanges. Shockingly, while its public presence in India is all but dead with the delisting, its offshoot is alive and kicking in US stock exchange, Nasdaq.
H&M is one of the seven companies to be will be delisted by the National Stock Exchange (NSE) because they are under liquidation. The others are Brandhouse Retail of the S Kumar group, Elder Pharmaceuticals, First Leasing Company India, a one time pioneer of Indian leasing, Glodyne Technoserve, Tulip Telecom and Varun Industries.
The NSE is also delisting 11 companies because they have been delisted by BSE on 11th May as part of a group of 200 companies whose shares have remained suspended for six months. These are Agro Dutch Industries Limited, Broadcast Initiatives Limited, Crest Animation Studios Limited, KDL Biotech Limited, Kemrock Industries and Exports Limited, Kingfisher Airlines Limited, Lumax Automotive Systems Limited, Nissan Copper Limited, Plethico Pharmaceuticals Limited, Shri Aster Silicates Limited, Surya Pharmaceuticals Limited.
It is interesting that H&M has attracted the attention of stock exchanges only now despite tens of thousand complaints piling up in every possible forum from shareholders, employees who have not been paid and most tragically, from senior citizens who were systematically lured to invest in its fixed deposits by agents based on its published financials and the high credit rating it enjoyed until the end of 2014.
In fact, H&M posted exceptional numbers, year after year, right until December 2014 quarter, even after it has stopped repaying depositors since June 2014. In a survey conducted by Moneylife Foundation, H&M topped the list of companies with the highest number of complaints by fixed deposit holders against it. Depositors, lured with high interest rates, said that cheques issued to them had bounced because of 'insufficient funds'. This clearly indicated that the financial results of the company were being manipulated. But the exchanges remained largely unconcerned. (Read Moneylife 2015
Shockingly, H&M shares continued to hold firm (after a minor decline of 12% on 22nd January 2015), even when employees were tweeting about not being paid their salaries and unpaid creditors and depositors were filing a winding up petition
. It seems clear that the stock was being continuously manipulated, despite issues with H&M being reported and brought to the attention of the regulator multiple times since 2006 when it made a controversial acquisition of vMoksha. Since then, it has also been punished by the regulator in 2011
, but apparently not seriously enough to bother the company. Even the fact that its former chairman was arrested by the Economic Offences Wing of Chennai
made no difference and the company got off the hook very quickly.
H&M had collected Rs.55.25 crore from 6,540 depositors from across the country. Out of this, 1046 depositors filed complaints against the company before the Economic Offences Wing (EOW) for default on deposits worth Rs.46.04 crore and interest of Rs.72.81 lakh. There are several cases filed across India by depositors against H&M.
In a particular judgement on invesor complaint, the Madras High Court said, "Promises are like crying babies in a theatre, they should be carried out at once." The court was also of the opinion that a vast amount may have been stashed away. Further, despite several proceedings against H&M in various courts, the company sold its two properties, but failed to deposit entire proceedings in the Court. As per the status report submitted by EOW before the HC, the company sold two properties for Rs.11 crore and Rs.15 crore, but deposited only Rs.1 crore and Rs.5 crore, respectively in the Court. The court declared that H&M was commercially insolvent and was unable to clear its dues. In the the opinion of the Court, H&M had siphoned off funds, was unreliable and it cannot be believed any further.
On 21st January 2016, an official liquidator was appointed to take over the affairs and to prevent the company from further siphoning of funds collected from investors. Here are the previous articles written by Sucheta Dalal although neither the market regulator, nor the exchanges paid any attention to the H&M scam for a very long time.
As per the regulations, the delisted company, its whole-time directors, promoters and group firm would be debarred from accessing the securities market for 10 years from the date of compulsory delisting. Based on per the fair value determined by the independent valuer appointed by BSE, the shares for the public shareholders will be purchased by the promoters of these companies. Further, as advised by SEBI, these companies will be moved to the dissemination board of the exchange for five years.