Religare : Another contender for “Next Satyam”

The issue of diversion of funds from the company is not limited to Fortis alone.

The auditors of promoter group’s Religare Enterprises (“Religare”) have also qualified its Q3 financial statements for similar issues. As per their limited review report, “Recently, Company has forwarded inspection reports from RBI on the financial position of Religare Finvest Ltd as on March 31, 2016 and March 31, 2017, raising various concerns particularly additional material NPA
provisioning (Rs. 798 Crores), diminution in value of investments (Rs. 15 Crores), resultant negative adjustments in net worth, restriction on expansion  of credit/ investment portfolios, increase in corporate loan book against RBI directions including some cases of movement of funds from intermediary borrowing companies to group companies of Religare Finvest Ltd (further corroborated by our review procedures during the year (i.e. further funds have been given during the year to such intermediary borrowing companies to the extent of Rs. 525 Crores) besides continuing weakness of internal control, seeking clarity on roll over of fixed deposits lying with a
Bank. These may have penal consequences from regulators (including RBI) and would then impact the carrying value of investments of the company in Religare Finvest Ltd. Considering the above, there are indicators on the material impairment of carrying value of investments of the company
in its subsidiary Religare Finvest Ltd. Extensive review is being conducted.”

In addition, the auditors have qualified the statements stating, “The company is registered as ND-SI-CIC under Section 451A of RBI Act, 1934 and primarily holding investments in various group companies. Management has informed us that impairment study is yet to be concluded with respect to investments held by the company in its major subsidiary, Religare Finvest Ltd
constituting more than 75% (aggregating to Rs. 2900 Crores) of the total investments as on December 31, 2017.

The auditors also state, “Attention is invited to note no.5 (b) of the standalone unaudited financial results referred to in this report in relation to put option exercised by non-resident shareholders of Religare Finvest Ltd on the company (amount involved Rs. 525 Crores approx. as per Hon’ble Delhi
High Court order dated 5th Jan 2018). Pending litigation in the Hon’ble Delhi High Court, its potential impact due to probable impairment on the increased shareholding of the Company in Religare Finvest Ltd and cash outflows of the company is yet to be considered.”

These statements by the auditors makes it clear that the modus operandi of Religare been the same as of Fortis in the matter of movement of funds to Group companies. Instead of advancing loans themselves, both Religare as well as Fortis have routed the funds through subsidiaries; Fortis through Fortis Hospitals Ltd and Religare through Religare Finvest Ltd.

This has helped them avoid seeking shareholder approval. Also, Religare has tried to keep these irregularities under radar by not conducting any impairment study on Religare Finvest

Source: InGovern

SME is where the action is

It is early days, but India has more than a million companies that potentially require capital.

SMEs create more jobs; so there is always the comfort that most of the money raised is actually going to companies, and they will use it to expand and create jobs.

I would be surprised if we don’t have 5,000 companies listed in the next few years. Every moment there are 50-60 companies in the pipeline.

One of the issues hindering the growth of SME listing is the worry of promoters that their companies will be taken over. But we hope that these 220 pioneers that are now listed will become role models.

said Ashishkumar Chauhan, MD of BSE

India may get thrown out of MSCI Indices

MSCI Inc. (NYSE: MSCI), a leading provider of research-based indexes and analytics, announced today that it is closely monitoring developments related to the concerted announcement by three Indian stock exchanges, including the two principal exchanges, of the imposition of anti-competitive measures restricting the accessibility of the Indian equity market.

MSCI is evaluating the measures’ potential impact on existing financial products and the future accessibility of the Indian equity market for international institutional investors more generally.

In a clearly negative development for the accessibility of the Indian equity market for international institutional investors, the exchanges’ announcement made on February 9, 2018 would impose, following the expiration of contractual notice periods, a set of restrictions on the use of traded price data inconsistent with the practices of any other market in MSCI’s Emerging Markets Index series and could result in an unprecedented disruption of trading in financial products in markets around the world.

Based on the exchanges’ press release, we understand that the exchanges do not seek to impose a precipitous or disorderly wind down of the various products that would be affected in many markets around the world.

Nonetheless, given the breadth of the application of the changes referred to in the announcement, we believe that if the changes are put into effect, the result will be disruptive and harmful to international institutional investors in Indian equities whether accessing the market onshore or offshore.

MSCI strongly suggests the Indian exchanges and their regulator, the Securities and Exchange Board of India (SEBI), reconsider this unprecedented anti-competitive action before it leads to any unnecessary disruptions in trading or a potential change in the market classification of the Indian market in the MSCI Indexes.

Press Release by MSCI