Short-changers of public & banks
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Prime Minister Manmohan Singh last week spoke about the need to set up fair and effective regulatory institutions and legal processes. In other words, it's a clarion call to get rid of crony capitalism and promoters and other vested interests who shortchange the public and the banking system.
A survey released by India Inc — Confederation of Indian Industry to be precise — last week says 62 per cent of the respondents consider that the existing framework of regulations in India is ineffective for enforcing rights and obtaining remedies for corporate governance issues. It says key issues like sale of business, intra-group mergers and issue of preferential warrants are not adequately addressed by the regulations. As much as 83 per cent of the respondents indicated that Clause 49 – guidelines on the composition of the board of directors — is serving its limited purpose. A board dominated by the cronies of the promoter who, in turn, are in cahoots with the ruling class and the middlemen will remain "yes men" to corporate shenanigans.
Figures speak. As many as 932 companies — out of around 5,500 companies listed on the Bombay Stock Exchange — have not complied with the corporate governance guidelines under Clause 49 of the Listing Agreement. Another 1,094 companies have not come out with their financial results as of March 2012.
Consider the issue of excessive leveraging by some corporate borrowers in the last three years. There are questions on the manner in which project appraisal is conducted especially the feasibility itself. A Credit Suisse report says that the combined debt of the top 10 groups surged over five times in last five years from Rs 99,300 crore to Rs 5,39,500 crore. There's lingering suspicion in some quarters that project costs were overestimated and fund diversion has taken place.
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