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Views | The landscape of dodgy deals

Views | The landscape of dodgy deals

Indian companies aren’t known to be big advocates of transparency and voluntary disclosures. In spite of this perception, it came as a surprise when it emerged recently that Reliance Industries Ltd held a large stake in 12 television channels operated and managed by the Eenadu Group. This investment, worth Rs2,600 crore, had been kept under wraps. It was disclosed through a stock exchange announcement for the first time only this year, and that too, at the time the sale of the asset to the Network 18 Group was announced. According to reports, the investment was likely made in 2008.

While there is little doubt that shareholders have a role to play in getting companies to behave, regulators must shoulder a large part of this responsibility. Needless to say, the regulators are missing in action in most of these cases. Prescriptions for disclosures have undoubtedly improved over the past few years. Companies now have to grapple with new demand from regulators, such as business responsibility reporting, sustainability reporting and financial reporting according to International Financial Reporting Standards (IFRS). But it will be farcical to conclude that Indian companies will soon reach international standards of reporting. While the new prescriptions are welcome, from a shareholder’s perspective, it’s more important that basic levels of disclosure are adhered to in letter and spirit.

This will happen when regulators take appropriate action in cases of poor disclosure. For instance, the Securities and Exchange Board of India’s action in the recent IPO scams has been inadequate, even though it discovered disclosures to be false. Regulators also need to tighten disclosure norms, and remove existing loopholes. The current listing agreement appears to provide an escape route for firms by using terms such as material and price-sensitive information with respect to mandatory disclosures. These terms are open to interpretation and it will be better if disclosure prescriptions in listing agreements are better defined. 

Do India’s market regulators need to step up their vigil? Tell us at

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