The largest government company had promised redressal of complaints from investors, during the sale of 10% equity seven years ago. It also said it would pay interest if investors did not receive refund orders within 15 days of the issue closing. But the company has not done so, and it is now on the verge of a follow-on issue

The largest public sector company by market capitalisation in our country is Oil & Natural Gas Corporation (ONGC). It is also the highest profit-making corporate in our country with international operations. It is one of the four publish sector units that have been awarded the "Maharatna" status by the government of India.

In March 2004, the company came out with an offer for sale of 10% of its equity to the Indian public, amounting to over Rs10,500 crore, which was a huge success. It received unprecedented response from retail investors and the issue was oversubscribed several times-a record at the time. This resulted in the company and its registrars not being able to make the allotment of shares and issue of refund orders within the time stipulated in the offer document. This gave rise to a large number of complaints from investors.

The offer document contained this undertaking by the selling shareholder and the company: "…that the complaints received in respect of this offer shall be attended to by the selling shareholder expeditiously and satisfactorily. The selling shareholder has authorised the Company Secretary and Compliance Officer and the Registrar to the offer, to redress all complaints, if any, of the investors participating in this offer."

The offer document further stated that the selling shareholder shall pay interest at the rate of 15% per annum on the excess bid amount received, if refund orders were not despatched within 15 working days from the bid/offer closing date. But when investors demanded interest for the period of delay, the company was in a strange predicament, because, the funds realised from the offer for sale had been credited to the Consolidated Fund of India, as it was due to the Central government. The company did not receive any amount from this issue. Due to this unexpected situation, the company appears to have not been able to sort out this matter for the last seven years.

According to Stock Exchange requirements, all listed companies are required (under clause 41 of the listing agreement) to disclose every quarter-when publishing the quarterly results-the number of investor complaints pending at the beginning of the quarter, the complaints received and disposed off during the period,  and the complaints that remain unresolved  at the end of the quarter. In compliance with this requirement, the company has been meticulously mentioning these details only in respect of normal investor complaints with regard to transfer of shares, dividend payments, etc. However, during the last 28 quarters, the company has been honest enough to make the following statement after these mandatory details about the complaints outstanding at the end of quarter.

The notes read: " These exclude investors' complaints regarding the offer for sale up to 10% of equity shares of the Company made by the Government of India in March 2004, which are being attended to by the Registrars to the issue appointed by the Government of India."  The moot question is, if the company has not been able to resolve the complaints for the last seven years, how can an investor expect to get his/her complaint resolved at any time in the future?

ONGC has now announced that it will be coming out with a follow-on public offer (FPO) of shares  shortly. Will the Securities and Exchange Board of India (SEBI) allow the company to come out with the FPO without fully resolving the outstanding investor complaints pending for such a long time? SEBI should ensure that all the pending complaints are resolved, before allowing the company to divest stake.

SEBI should also ensure that the company and the registrars suo moto identify all those cases where refund orders have been sent after a delay and all those investors should be properly compensated with interest not only for the delayed period, but be paid compound interest. (Interest on interest should be paid to serve as a deterrent against repetition of such instances in future.) Those responsible for this state of affairs should be pulled up, and the aggrieved investors should be compensated on the lines of the disgorgement by SEBI in the IPO scam, recently.

Can we expect SEBI to act swiftly to protect not only the interest of the investors, but also the dignity and honour of the highest office in the country, in whose name the public issue of shares was made?

(The author is former managing director and CEO of a mutual fund. He writes for Moneylife under the pen name 'Gurpur'.)