Vanishing companies of 90s
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Transcript of Vanishing companies of 90s
VANISHING COMPANIES OF 90s
Good Bye!!!
Vanishing Companies As per the definition stipulated by SEBI:
Any listed company, which raised
money through IPO but, stopped
operations, did not file returns either
with the RoC or SEBI and did not
exist on the registered premises
is termed as vanishing.
Liberalize the market
Controller of Capital Issues
SEBI
IPO
Promoters took
advantage
Raise money at fancy
premiums
No supervision of SEBI or DCA
Companies misused the
funds
Investors allege SEBI and DCA
Case of Vanishing Companies in India
Number of vanished companies in 90s
• 1992 to 1998- around 122 companies 'vanished' after making IPO of their equities.
• Over 7000 plantation companies were vanished in the era of 90s.
• Most of them were located at Maharashtra and West Bengal.
Vanished Plantation CompaniesCompany Location
EURO FRESH PRODUCE PRIVATE LIMITED
Chembur, Mumbai.
APS TEA CO PRIVATE LIMITED Jalpaiguri, West Bengal.
INVISION PROJECTS PRIVATE LIMITED
Prabhadevi, Mumbai.
DINESH AGRO PRODUCTS LTD Pune, Maharashtra.
ASR AGRO LTD Vishakhapatnam, Andhra Pradesh.
BHAWANIPUR TEA COMPANY PRIVATE LIMITED
Sonari, Assam.
HARIOM PROTEINS PRIVATE LIMITED
Ahmedabad, Gujrat.
• Failed to file returns with Registrar of Companies for a period of two years.
• Failed to file returns with Stock Exchange for a period of two years.
• Not maintaining company’s registered office at the notified address.
• None of its Directors are traceable.• Mis-statement & Fraudulent prospectus and
Balance Sheet.
Reasons of vanishing companies
What went wrong?• Inflated figures for cash and bank
balances of INR 5,040 cr. were reflected
as INR 5,361 cr. • Operating Profit were artificially
boosted from the actual 61 cr. to 649 cr.• Satyam also showed a fictitious interest
earning of Rs. 376 cr.
Need for Manipulation
Show the superior performance of
company.Drive up the stock values. Manipulations were like: Raising fictitious bills for services that were
never rendered. To increase the Cash &bank balance
correspondingly. Operating profits were artificially boosted.
IMPACT ON INDIAN I.T INDUSTRY
• More difficult for other Indian IT service players to win business.
• Hurt the prospects of foreign money flowing into India. • Global perception about Indian companies.• Indian stock market slipped over 7% on 7th
Jan., 09.
Effects of Satyam Scam• “Apparently fearing that he may lose his job, a
23yr old employee of satyam computers allegedly committed suicide.”
• US banks cancelled credit cards of most of the US based Satyam employees.
Need to save Satyam• To maintain stability and to bring the
position of market on track.• To save the bread of 40,000 employees.• As investors were losing trust and
confidence on other private companies also.
Acquisition of Satyam
ENRON
Andy Fastow’s SPE strategy:
TEAK PLANTATIONS
ANUBHAV TEAK PLANTATIONS
• Anubhav Group of Companies.• Established in 1992.• 91 offices and over 1800 employees.
Commencement• World Wide Fund for Nature.• Integration from teak to furniture.• Mobilizing funds from the investors.
Problems• Income= 38 crores;
Net profit= 38 lakh.• Paid up capital= 36 lakhs;
Borrowings= 2.64crores.• Loans= 25 crores.
Investigation• Anubhav had serious liquidity problem.• Blame SEBI and rating agency.• Investors filed complaints.• Company procedures at fault.
• CRISIL: more than 300 crores were contributed by the investors.
• NABARD: The Teak trees were sold at Rs. 1500-2000.
• MRFD: found that for plantation of these trees costed only Rs 400.
• The return on investment was seven times more.• Yield of the trees with a girth of 60 cm and
above, in 15 years, would be about 5.1 cubic feet per tree.
• SEBI was invited by the ministry of finance.
After-effects• Criminal case on 13.10.1998.• Transferred to EOW-II Chennai on 22.01.2000.• Natesan was under judicial custody for 8 years. • Bail on 22.03.2007.
KINGFISHER AIRLINES“WELCOME TO AN AIRLINES WITHOUT PASSENGERS”
Snapshot of DownfallKingfisher airlines could not meet their
expenses.Total debt of Rs.7000 cr.Operational loss of Rs.1027 crores over
the last year.
BPCL even filed a court case for recovery on unpaid dues.
Their cheque of Rs. 151 crores bounced.Landing charges in Bangalore and
Hyderabad airports.
No assets that it can sell or mortgage.The bankers in lieu of converting Rs.750
cr. to equity, got 23% stake in the airline.Hence the banks lost about 300 cr. in this
transaction.Kingfisher’s total debt was Rs 8,414 cr.
Measures to avoid vanishes
SEBI should appoint their own auditors.
Director Identification Number.
The RoCs scrutinize the Balance sheets.
Mandatory for the professionals personally visit the premises.
Conclusion
• These companies are truly brands. Their walk-out had literally shaken up the economy.
• But now SEBI has become much more cautious and is trying to help the companies work efficiently.
• Only the plantation companies were left out without any scope to retain in the market.