For those stuck with their investments in any of the 331 shell companies whose shares have been suspended by market regulator SEBI, there might be a bleak ray of hope.
For those stuck with their investments in any of the 331 shell companies whose shares have been suspended by market regulator SEBI, there might be a bleak ray of hope, as the Finance Ministry says that trading in about a dozen of those companies is expected to resume in one week’s time, television channels ET Now and CNBC TV18.
The Securities and Exchange Board of India may also issue a notification soon to give the identified companies time to explain their position on the matter, the report said, adding that the companies may be asked to submit documents to prove their stand.
Earlier this week, SEBI directed BSE, NSE and Metropolitan Stock Exchange to initiate action against 331 listed companies which were suspected to be shell firms. These scrips will not be available for trading this month, and could even face “compulsory delisting”. The regulator’s directive came after the corporate affairs ministry shared a list of 331 listed companies that are suspected to be shell entities.
Stepping up the surveillance measures, these entities would be subject to independent audit and if required, forensic audits could also be initiated to check their credentials. In a communication sent to the BSE, the NSE and the Metropolitan Stock Exchange, SEBI asked them to keep the 331 shares in stage four of the Graded Surveillance Mechanism (GSM) with immediate effect.
The Ministry of Finance, according to the ET Now report, has explained that action against some of these companies was taken due to spike in trade during demonetisation. The ministry further said that some of these companies identified by the Ministry of Corporate Affairs were found to be violating the income tax rules.
It may be noted here that the 331 shell companies against which SEBI has initiated action include well-known companies such as Prakash Industries, Parsvnath Developers, J Kumar Infraprojects, Gallant India and others. Several renowned investors Rakesh Jhunjhunwala and the country’s top mutual funds such as HDFC Mutual Fund, Reliance Mutual Fund, UTI Mutual Fund, DSP Blackrock and Birla Sun Life Mutual Fund have stakeholdings in some of these companies.
While several of these 331 companies have returned handsome gains to their investors so far this year, up to tripling in some cases, there looms a big question mark not only on whether the investors would now be able to realise those returns but also on if they will be able to get their capital back. Some of the companies have made statements expressing their dissatisfaction on the SEBI order, and have sought to make it plain that they are not shell companies and have legitimate business operations.