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Jan 24, 2013, 08.45 AM IST | Source: Moneycontrol.com

Over Rs 61,000cr investor money blocked in suspended cos

Research firm CNI Research says a whopping Rs 61,000 crore of investor money is blocked due to suspension of companies for various reasons at the bourses.

Moneycontrol Bureau

Research firm CNI Research says a whopping Rs 61,000 crore of investor money is blocked due to suspension of companies for various reasons at the bourses.

In the year 2009 (Nov 17, 2009), CNI had done an exclusive study on the companies, which were suspended from 1992 till 2009. In the study report, CNI found that around 1450 companies were suspended out of which for 574 companies (536 BSE and 38 NSE), data was not available with the exchanges. In common parlance, it could be known as vanished companies. However, officially, only the finance ministry has the power label them these as "vanished companies".

CNI says the data of Rs 61,000 crore was arrived at based on the available information and there is every possibility to conclude that this figure must been higher than Rs 1,00,000 crore.

"If this sum is correct than this could be amongst the biggest scams to have happened in the country and one therefore wonders as to the accountability factors for the public losses," CNI questions.

CNI says the considerable lapse of time since the companies have been suspended also suggests that this could be one of the backdoor de-listing routes, where promoters sell shares in the open market followed by violation of one of the listing agreements which prompts the exchanges to suspend the companies from trading, not without sufficient notices from their end.

"Yet at the end of the day, the loser is none other than retail investor. There is no recourse to any of the retail investors to dip in the investors' protection fund in such cases where stocks have been suspended at the behest of the promoters," the report highlights.  

The common feature of most of the companies was that the promoters, before violating listing agreements, preferred to sell entire stakes. The promoters' stake was either zero percent or close to 1 percent at the time of suspension. "This leads to an obvious conclusion that promoters dumped their shares in the market before getting suspended," the report says.

"Rs 12,145 crore for 250 companies shareholders’ net worth unlocking suggests that the balance 1,200 companies can still help unlock investors wealth of Rs 58,296 crore in current scenario. Maybe rising market may give more amounts. The figure of Rs 58,296 crore is arrived at using pro rata method," CNI says.

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