As many as 1,088 companies which raised thousands of crores from the public and listed on now-defunt regional stock exchanges are not traceable, markets regulator Securities and Exchange Board of India has said. As these companies have disappeared from the market, they will be included in the list of vanishing companies of the Ministry of Corproate Affairs. The regulator has now decided to initiate action against these “non-compliant exclusively listed companies (ELCs) on the dissemination board (DB) and its directors/promoters”.
When 18 regional stock exchanges were derecognised, these companies were required to be placed on the dissemination board of national exchanges like the BSE or the NSE. Leading stock exchanges like the BSE had launched a dissemination board mechanism enabling dissemination of bids/ offer placed by buyers and sellers of securities of companies that are listed exclusively on exiting or de-recognised regional bourses using the services of the trading members.
“With respect to the 1,088 companies, which are not traceable, a process has been initiated for their inclusion in the list of companies identified as ‘vanishing’ (maintained by Ministry of Corporate Affairs),” Sebi has said. Once a company is declared as vanishing, Sebi debars the directors and promoters of such companies from accessing the capital market, in addition to actions that may be taken by Registrar of Companies, Ministry of Corporate Affairs, including prosecution against promoters and directors of such companies.
According to market estimates, if a company raised an average of Rs 10 crore from investors, the total money stuck in such vanishing companies could be around Rs 10,000 crore. “Most of these are either paper companies floated with the intention of diverting public money. They don’t have any operations or assets and most of them were listed in the early 1990s. Investors who put money in such companies can forget their investment,” said veteran BSE dealer Pawan Dharnidharka.
India’s leading exchanges — BSE and NSE — were demutualised and corporated almost ten years ago in 2007. However, following the exit of 18 regional exchanges since 2014, around 3,000 companies were moved to the dissemination board of nationwide stock exchanges as they failed to get listed on the latter. In January 2015, Sebi had said firms exclusively listed on exiting regional stock exchanges will be given 18 months to get listed on nationwide stock exchanges. These companies could be moved to the dissemination board of a nationwide stock exchange till the time of listing.
In October 10, 2016, Sebi provided three months to these companies to list on the dissemination board and submit a plan of action to the designated stock exchanges (DSEs) either to list or provide exit to its shareholders. To safeguard investors of firms listed on non-operational bourses, Sebi then allowed such companies to raise capital through preferential allotment route to meet listing requirements.