BSE bars 1,670 companies for non-compliance

BSE bars 1,670 companies for non-compliance

Mumbai August 20, 2007

Many investors are unable to exit from the stock market as nearly 1,670 companies or over 20 per cent of the 7,753 companies listed on the Bombay Stock Exchange (BSE) stood suspended as on July 7, 2007.

A host of these companies were suspended by the exchange for violation of the listing agreement and procedural issues.

According to the provisions of the Securities Contracts (Regulation) Rules, 1956, and by the laws and regulations of the exchange, a company listed on the BSE is required to comply with various clauses of the listing agreement, failing which may lead to suspension of trading activities of the company.

With the number of defaulting companies increasing every quarter, the BSE in November last year had issued a public notice proposing to delist over 650 companies from its official records as trading in securities of these companies had been under suspension for a period of three years or more.

However, the move of the exchange was stalled by Prithvi Haldia, managing director, Prime Database, who argued that such a move would reduce a company's accountability to a minimum. The small investors would be the chief sufferers in case the company was delisted as there would be no exit window for them.

On the question of how investors could retrieve their investments from such companies, Haldia said it was up to the Securities and Exchange Board of India (Sebi) to track down these companies and make them accountable. He, however, added it could take several years. According to Dhirendra Kumar, chief executive officer, Value Research, the crux of the matter lied in the implementation of proper laws.

"In a scenario, where companies are making a beeline for raising money from the capital markets, stock exchanges and the regulator should exercise great caution while granting listing permission,"he said.

An e-mail query sent to the BSE remained unanswered.