Comment of the Day

August 10 2012

Commentary by Eoin Treacy


Thanks to a subscriber for this strongly worded report from Veritas Research. Here is a section:
We believe that disclosures at IndiaBulls Real Estate Limited (“IBREL” or the “Company”) and IndiaBulls Power Limited (“IBPOW”) are unreliable and that the sole purpose of IBREL is to bilk institutional and retail investors for the benefit of select insiders. The controlling shareholders (“CS”) are running the organization as a piggybank, while proclaiming propriety and espousing credibility. The association of reputed institutions, individuals and organizations with the Company is vexing to say the least.

Given our findings (based on analyzing 57 group companies including private companies of CS, 201 financial and legal documents including annual reports, annual returns, various schemes of arrangements filed in Indian courts, stock exchange filings etc., details in the annexure), any valuation opinion on either IBREL and IBPOW is bound to be erroneous. Institutions and individuals should SELL all IndiaBulls group stocks on the principle that corporate governance has been sacrificed to enrich the CS. We also believe that investors should make use of all remedies available in the Indian legal system to claw back the illbegotten gains of CS.

Not only do we believe that the merger of Indiabulls Infrastructure Development Limited (“IIDL”) with IBPOW is a means of transferring value from the public shareholders of IBPOW to a select few, but also that any boost to net worth of IBPOW claimed by management post-merger is unverifiable.

Eoin Treacy's view Following the incident with Satyam Computer a number of years ago, investors are alert to threats to corporate governance. However, the stock market has reflected reticence towards Indiabulls Real Estate and Financial Services for quite some time. Both remain in consistent downtrends.

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