IndiaBulls Group – Cheating / Bilking India – Veritas Research
August 8, 2012
Veritas Research is the crusader of Capital Markets writing out bold reports against companies like Reliance, etc ir-respective of the Political, Money and Muscle power the company’s management enjoys in India.
In a report on the IndiaBulls Group, Veritas has leveled some serious charges of bilking institutional and retail investors for the benefit of select insiders and put a SELL Recommendation on IndiaBulls Real Estate, IndiaBulls Financial Services, IndiaBulls Power [Down 8% after SELL-OFF]
Veritas has published this report after analyzing 57 group companies including private companies of promoters / insiders, annual reports and documents of all these companies. Corporate governance has been sacrificed to enrich the Insiders.
Questionable Transactions of IndiaBulls Group
In allotting equity to FIM Limited (“FIM”) and Hexagram Investments Private Limited (“Hexagram”), IIDL’s fair value was established at INR 1.23B – allotment date of May 12, 2011 for 41.6M shares at a price of INR 10 per share aggregating INR 416.4M ($U.S. 7.6M)1 – compared to the merger ascribed fair value of INR 10.5B ($U.S. 190.6M) to IIDL by management, prior to its amalgamation with IBPOW (Appendix 1, Page 22). How can the fair value of a questionable entity, IIDL, increase by a multiple of 8.45x in less than 10 months post-allocation of equity to FIM and Hexagram should be explained by management.
Therefore, while public shareholders of the Company suffered an erosion of 18% in the value of the stock price in F11, the Controlling Shareholders / Promoters enriched themselves via profit after tax of 1.25B7 ($U.S. 22.9M) reported by IIC and IINFC combined.
Why is IndiaBulls Unreliable ?
33% of the increase in profit before tax for F12 of INR 3.3B ($U.S. 60.2M) at IBULL was due to the inclusion of interest income from the EWT [Employee Welfare Trust].
Finally, they Recommend a SELL in the stocks due to the following reasons,
- IndiaBulls Power doesn’t have the funds to meet its capital commitments to complete its projects and, therefore, is dependent on Indian financial institutions for funding.
- IndiaBulls Real Estate doesn’t have the track record of delivering on its promises and is unlikely to fulfill its commitments to institutional and retail investors.
- 22% of the book equity of IBULL is exposed to the Employees’ Welfare Trust, which doesn’t have the cash flow to service its debt, thereby calling into question the credibility of IBULL’s loans and advances
We recommend a SELL on IndiaBulls Group Stocks as well because of the fact that Politician & Businessmen nexus running the show is coming to an end as highlighted by Top Central Level Bureaucrats in New Delhi.