Sunday, July 19, 2020

Delisting a tool to wealth destruction?

In India delisting by almost all the companies turned out to be losing deal for small investors most of the time. Here we will discuss how small investors lose money in the delisting of shares from the stock exchanges. 
In any delisting process, the buyer or in other words acquirer is the promoter of the company. The promoters of the company always have more information about the business than any analyst forgot about the lay small investor. The promoters use timing and pricing in their favor as much as they can. The Promoters buy small investors stakes much lower than its intrinsic value. These things are happening for the last couple of decades. As far as we can remember these are few examples from the past. 
Bharti Telecom:- This company was promoted by Mr. Sunil Bharti Mittal of Bharti Airtel. This company was listed company, and Mittal's bought out other shareholders at a meager price, and now this company is holding company of Bharti AirTel and has the holding of more than 200 Cr. of Bharti Airtel. Which worth about 76000 Cr. 
Essar Oil:- This company got delisted itself in 2015 the promoters tried their best to short change their shareholders by trying to buy back their shares at Rs. 80 but couldn't manage at such a low price had to pay Rs. 262.80 but later SEBI found that shareholders were short-changed and shareholders were paid additional Rs. 75048 per share.
Vedanta:- It is going to be a good example of this because the delisting process is on. The promotor Mr. Anil Agarwal is using this pandemic COVID19, depress metal market conditions and share price and try his best to get away with the company at throwaway prices. 
There are lots of examples where small investors hadn't got their rightful due. We can think of few are likes of WIMCO, A V Thomas, Shri Natraj Ceramics ( now called Dalmia Refractories), Bharat Hotels, Axcel India Ltd, Atlas Copco, Cadbury ( now called Mondalaze India), C& S Electric Limited, India Carbon Limited, Indofil Industries Limited, Otis Elevator Limited, and a new entrant in his list is INEOS Styrolution India Ltd. 

The most important thing that in India lots of small investors are not well versed with the buyback process and don't opt for it and due to that they left with stocks which became untradable. The prime example of these are WIMCO, Essar Oil, Cadbury, etc There are lots of examples that investors are not aware of some shares are on their name because they lost the certificates and they have moved to another place too so they don't even get the communication sent to them on old address by the companies. We at Supergrowth not only assist those investors in finding those shares and getting duplicate share certificates but even go to the most difficult, cumbersome, and legally lengthy process of claiming them from the government in other words Investor Education and Protection Fund (IEPF).     


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