Veritas ‘sell’ report: IndiaBulls files complaint

Shares crash as report suggests investors to sell; Company files police complaint against research firm

Written by ENS Economic Bureau | New Delhi | Mumbai | Published:August 9, 2012 1:24 am

Real estate-to-power sector major IndiaBulls filed a police complaint against Canadian investment research firm Veritas in Gurgaon,Haryana,today against their report which alleged serious irregularities committed by the group.

The allegations had sent stock prices of IndiaBulls group companies crashing during the day. The stocks of IndiaBulls Real Estate,IndiaBulls Power and Indiabulls Financial Services later recovered to close with a fall of 2.4 per cent,3.2 per cent and 0.8 per cent,respectively.

Group spokesperson Gagan Banga justified the police complaint against Veritas “as the report has been brought out with mala fide intentions of profiteering and market manipulation”.

But co-author of the Veritas report,Neeraj Monga,in an email,told The Indian Express,“(IndiaBulls) management had no qualms about profiting at the expense of public shareholders while redirecting funds to privately owned IIC and its subsidiaries. Our report proves that conclusively”. He also said,“Any attempt at filing a police complaint against providers of unbiased independent advice in the interest of the masses of India that invest hard earned savings in the Indian capital market,is an attempt at maintaining the status quo of India as a third world emerging market.”

The report titled ‘Bilking India’ alleged that the sole purpose of some of the group companies is to cheat retail and institutional investors for the benefit of select insiders. The report suggested investors should sell all IndiaBulls group stocks for lack of disclosure and corporate governance.

“Institutions and individuals should sell all IndiaBulls group stocks on the principle that corporate governance has been sacrificed to enrich the controlling shareholders,” said the Veritas report alleging that the disclosures by IndiaBulls Real Estate and IndiaBulls Power were unreliable.

The research firm has in recent months come out with tough reports on several companies including Reliance Industries,Reliance Communications,DLF and Kingfisher.

In their rejoinder IndiaBulls said there was intentional error made by Veritas on basic factual data that it claimed has resulted into financial loss in the stock market today for its shareholders.

The report dated August 1,2012,raises questions on the merger of Indiabulls Infrastructure Development with IndiaBulls Power and says that it was a means to transfer the value from public shareholders to a select few.

Among other allegations made in the Veritas report are allegations that in FY’12,Indiabulls Financial Services recognised income of Rs 120 crore on its profit and loss statement for loan extended to its Employee Welfare Trust (EWT) even as the Trust is incapable of servicing the loan. It also alleges that inclusion of interest income from there resulted in increase in profit before tax for FY’12 by 33 per cent. Banga said,“The figure of NII (net interest income) arising out of EWT is Rs 18 crore ,which is less than 1 per cent of total NII of Rs 1,866 crore for the company. The same being projected as 33 per cent of profit before tax in headlines demonstrates mala fide intentions under Indian Penal Code.”

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