The J.J. Irani committee report on the new Companies Act opens a window of opportunity for government to consider a serious investor protection programme. But the latest ‘Indian Household Investors Survey-2004’ shows the extent to which small investors are in a bind over the current investment scenario.Well over 1/3rd of retail investors (38 per cent) are shareholders in companies that delisted somewhere along the line, and so don’t fall under Sebi’s radar any longer. Worse still, most such shareowners did not know what the implications of holding the shares are, finds the study, subscribed by the Investor Education and Protection Fund (IEPF) managed under the Ministry of Company Affairs.The proportion of shareholders with shares in delisted companies goes up with age and income, it adds. In fact, if extrapolated for the entire country, the survey means that ‘‘around 30 lakh households (of a total 2 crore households holding shares) would be having shares of some delisted companies.’’ Some 20 per cent of these shareholders would be aged up to 25 years, and 50 per cent above 71 years. The explanation, says the report, is that more people in the higher income and age classes became shareholders during the roaring bull market of the early 1990s. ‘‘A lot of bogus or unsound companies were floated in this period,’’ it adds. Though exact figures of firms that have already been delisted are not available, the household survey pegs them at 2,000 to 3,000, apart from the 3,500 Z-group companies on BSE, which are known not to comply with Sebi’s listing agreement. In all, the BSE has 6,330 listed companies including Z group firms, and the total number of listed companies in India is 9,644. ‘‘To get an idea of why an investor protection programme is absolutely essential, consider that a huge number of our respondents (80 per cent) complained that such shares of delisted firms cannot be sold. Others said that they are not getting dividends from these companies, or no annual reports. Many did not also know that just because a firm is listed does not mean it will be actively traded too,’’ said L.C. Gupta, chairman, Society for Capital Markets Research and Development, which ran the survey last year. ‘‘This survey of roughly 6,000 households was the largest such exercise. Its aims include finding a way to protect shareholders of delisted companies,’’ says Gupta. Most companies that fall off Sebi’s radar either deliberately do not meet norms, while others have gone bankrupt, though not all of them. ‘‘From what we hear, many of them are still running businesses,’’ the survey says. It ends with saying changes in the company law ‘‘seem necessary.’’
