Indiabulls warns of legal action against Veritas; says report not factual

Shares of four Indiabulls firms plunged sharply after a Canada-based research firm pointed out serious irregularities in the group, which in turn warned of criminal proceedings against the authors of the report for “an intentional act for profiteering”.

Shares of Indiabulls Real Estate fell by over 12 percent, Indiabulls Financial Services by 11 percent, Indiabulls Power by 11.8 percent and Indiabulls securities by about five percent.

The stocks went into a tailspin after a Veritas Investment report about Indiabulls surfaced at the broker terminals and in dealing rooms here this morning, wherein promoters of the group have been accused of sacrificing corporate governance to enrich themselves, besides other allegations.

[caption id=“attachment_410849” align=“alignleft” width=“380”]  Veritas’ Neeraj Monga, who has authored most of its reports about Indian companies, did not reply to queries . Reuters[/caption]

Canada-based Veritas has hogged the limelight in recent months with its equally damning reports about other Indian entities -Reliance groups, DLF and Kingfisher.

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Veritas’ Neeraj Monga, who has authored most of its reports about Indian companies, did not reply to queries on whether the research firm had contacted Indiabulls before publishing its latest report.

Reacting to the report, Indiabulls said in a statement that it “will initiate appropriate criminal proceedings on the authors of the research report for publishing false and factually incorrect data, to create sensation and entice people for benefitting through trading, for the sole purpose of selling their research reports for money.”

Queries sent to Monga on whether Veritas has heard anything from Indiabulls after the report was published remained unanswered. Claiming that the report contained intentional error on basic factual data, which is resulting into loss for thousands of shareholders, Indiabulls said that erroneous figures demonstrate “the malafide intentions and criminal actions under Indian Penal Code.

“We firmly believe that this is not an oversight but an intentional act for profiteering.” In a detailed rebuttal of the points made in Veritas report, Indiabulls said: “The allegations made are factually incorrect and have ignored disclosures in public domain made through the Annual Reports of FY-2011 and FY-2012, which have also been circulated to all shareholders.”

Veritas report has said that public disclosures made by IndiaBulls Real Estate and IndiaBulls Power are unreliable and that the sole purpose of Indiabulls Real Estate “is to bulk institutional and retail investors for the benefit of select insiders.“The report said the controlling shareholders of Indiabulls companies “are running the organisation as a piggybank, while proclaiming propriety and espousing credibility.

The association of reputed institutions, individuals and organisations with the company is vexing to say the least.” Veritas further alleged that the institutions and individual investors should exit all Indiabulls group stocks “on the principle that corporate governance has been sacrificed to enrich the controlling shareholders.”

However, the plunge in Indiabulls group stocks was limited to four companies as shares of Indiabulls Wholesale Services and Indiabulls Infrastructure and Power were trading with gains. Veritas claimed that it analysed 57 group companies including private companies of controlling shareholders, 201 financial and legal documents including annual reports, annual returns, various schemes of arrangements filed in Indian courts, stock exchange filings, annexure details etc, for its report.

PTI