Suspended animation of scrips: Investors suffer, and errant companies are let off the hook

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.

Comments
sathya cumaran
1 decade ago
i have been cheated by IIFL by bse nse sebi
R Balakrishnan
1 decade ago
Yes, indeed, delisting helps the bloody promoters. If SEBI is serious about investor protection, what should be done is to bar each and everyone (director/independent or otherwise, auditors and solicitors etc) from ever being associated with the capital markets and put up their names not only on the website of SEBI but also publish them in all national dailies.
The promoters should be held accountable. Punishing the shareholders is like helping the promoter to rob them.
sodhan
1 decade ago
Many seafood cos during 1994 era collected huge money that it is sunrise sector.Largest co Sharat Seafood is delisted and promoter is enjoying with free public money.They also sold their stake at higher levels also converted limited co to almost private entity.Govt should take control of land bought for ponds as it is with public money.
sodhan
1 decade ago
Many seafood cos during 1994 era collected huge money that it is sunrise sector.Largest co Sharat Seafood is delisted and promoter is enjoying with free public money.They also sold their stake at higher levels also converted limited co to almost private entity.Govt should take control of land bought for ponds as it is with public money.
sodhan
1 decade ago
Many seafood cos during 1994 era collected huge money that it is sunrise sector.Largest co Sharat Seafood is delisted and promoter is enjoying with free public money.They also sold their stake at higher levels also converted limited co to almost private entity.Govt should take control of land bought for ponds as it is with public money.
Krupal K G
1 decade ago
Investors associations, also , should take up the new listing business that is taking place on the First day trading. In case of Emami Infra, Prakash steelage, Bedmutha Industries etc., rampunt speculation has driven the price to dizzy heights and dropped like a hot potato. Bringing all the new listings under Trade to Trade for one or two months is the need of the hour. Anchor investors lock in period of one month is too short a period, it should be increased to minimum 3 months, to make the market healthy.
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