Missing from BSE: Rs 10,000 crore

The latest figures reveal that a whopping 2,750 companies of the 5,651 listed on the BSE are not available for trading. That’s a jump of 54 per cent from 1,783 companies in March 2001.

This means some Rs 10,000 crore invested in these companies by 11 million investors — include fixed deposits and bank loans and the figure reaches Rs 25,000 crore — is as good as lost: the shares of these companies cannot be bought or sold.

Some are officially listed as ‘‘disappeared’’, more than 600. Many exist but no one knows where their money is. A few are flourishing but simply don’t want to share their money with their investors.

Like a blanket thrown over the country, the rot is everywhere: From PAL Peugeot in Mumbai to Western India group in nearby Pune, Prudential Capital Markets in Kolkata, Rajasthan Breweries in New Delhi and Golden Forests in Chandigarh.

Over the next few weeks, Express will track down some of these suspended companies. Our reporters have fanned out nationwide to meet penurious investors, examine decaying records, visit locked offices and call promoters who have fled their businesses — even their homes.

Nobody, not the BSE, not the Securities and Exchange Board of India (SEBI), not the Department of Company Affairs (DCA), which monitors companies officially, knows what’s going on with the 2,750 companies suspended from the stock exchange.

G.N. Bajpai, the chairman of the Securities and Exchange Board of India (Sebi), admits there’s a problem. ‘‘We know it’s a big concern among investors who put money in such companies,’’ says Bajpai.

That’s an understatement. These investors are not big banks or other companies. They are retired government employees, small traders, executives, vegetable vendors, soldiers and others from faceless middle-class India who have in many cases lost their entire life savings.

Indeed, the investigative series starting today was prompted by a growing number of phone calls to our offices from desperate, exhausted investors who had made the rounds of companies, regulators, even the local police, and had come away empty-handed.

Parliament’s Standing Committee on Finance recently noted ‘‘not even a single investor’’ has got back money invested in such companies. ‘‘The committee is pained to observe that a large number of companies have vanished. It appears no serious efforts have been put in place in this regard and the companies have taken an easy exit from the scene,’’ a committee report said.

In a report to Parliament, DCA said it could identify only 229 ‘‘vanishing companies’’ so far (to compound the confusion, 44 were since found to be filing their returns).

There’s a variety of reasons why the BSE — after a warning and a show-cause notice — suspends companies. These range from failure to publish financial results to non-payment of listing fees.

‘‘Some of them began with good intentions. But 85 per cent of these companies don’t deserve to be there on the BSE,’’ says Ami Tandon, MD India of multinational market research firm Fitch Ratings.

Whatever the reason, a suspension mostly indicates a company is in trouble. It means more Indian companies are disintegrating now than ever before. Blame it on mismanagement, or malfeasance, or both. A few, of course, fell victim to competition or the downturn.

And the problem is worsening. The BSE admits only 1,894 companies disclosed their financial results for the year ended March 2002. It’s mandatory for a listed company to disclose their performance every quarter. Nearly two-thirds of listed companies failed to disclose their financial results for the last quarter.

There are belated efforts being made now to crack down. Earlier this month, Sebi said companies that failed to redress investor grievances would have to pay Rs 1 lakh or Rs 1 crore per day. It has appointed an officer to pursue action against companies and directed others to assuage investors.

‘‘Sebi has also set up a Central Listing Authority to scrutinise companies which issue capital and list them on the exchange,’’ says Chairman Bajpai. ‘‘We’re ring-fencing the market to keep away fly-by-night operators. We are also working on a plan to solve problems created by vanishing companies. Our aim is to get the money back to investors.’’

DCA Secretary V.K. Dhall too claims to be taking action. ‘‘DCA has taken very strict measures under Section 63, 68 and 628 of the Companies Act. We have resorted to criminal proceedings, after getting it vetoed from legal authorities, and have started filing FIRs.

The Sebi-DCA committee, of which the Sebi chief and I are members, meets regularly. We’re also seeking legal opinion on recovering money from the vanishing companies,’’ he says.

To millions of tired, sceptical investors, that’s a very thin sliver of hope. But for now it’s the only one they have.