BSE begins clean-up operation

Perform 8212; or perish. This is the message of the Bombay Stock Exchange to erring companies. A record number of 885 companies 8212; most...

Perform 8212; or perish. This is the message of the Bombay Stock Exchange to erring companies. A record number of 885 companies 8212; mostly vanishing firms and those without any projects 8212; were thrown out of the BSE for violation of various norms thus far this year.

8220;Some 885 companies were de-listed by BSE after following the de-listing guidelines laid down by SEBI,8221; a BSE official said in a written reply. It8217;s for the first time in recent years that a large number of companies have been delisted from the exchanges.

With this, the number of listed companies on the BSE has come down to 4,735 as on August 31, 2004. Still it8217;s way ahead of other Asian bourses like Shanghai 780 companies, Korea 684 companies and Thailand 418 companies.

But investors had to pay a huge price for the cleaning up of the bourses. As per market estimates, the loss for the shareholders could be anywhere around Rs 4,500 crore. Assuming that a company had raised Rs 5 crore from the public, the total money raised by these 885 companies could be around Rs 4,500 crore. 8220;Once a company is delisted from an exchange, it will be automatically delisted from other exchanges as well. Shareholders won8217;t be able to sell their shares. It will be stuck with them for ever,8221; said BSE dealer Pawan Dharnidharka.

	De-listing procedures

			8226; Companies suspended for more than six months on the exchange can be delisted 8226; The exchange issues show-cause notices to firms as per Sebi guidelines 8226; A public notice of the proposed delisting is issued in a national daily 8226; Delisitng committee of the exchange reviews all cases 8226; Final list of delisted companies are published in a national daily as per Sebi guidelines.

Almost all of them are fraud companies with no real operations. 8220;They should not have been allowed to raise funds and list on the exchange,8221; he said. Most of these companies came to the market in the 1993-98 period after the Controller of Capital Issues office was abolished and free pricing regime was introduced in the primary market. Once-bitten-twice-shy exchanges and market regulator SEBI tightened the guidelines in the last three years and stopped the free flow of dubious companies and promoters into the market.

Investors and brokers say 75 per cent of the 1,936 companies in the Z group of the BSE are not worthy of a place on the stock exchange. 8220;Many of them don8217;t have any projects8230; they exist only on paper. These are owned by promoters who make money by rigging up the shares,8221; said a market source.

Investors and market players unanimously suggest that the regulator should come out with some mechanism to compensate shareholders of companies which are delisted from the exchanges. The delisting itself is an indication of earlier regulatory failure.