Indiabulls seeks legal action against Veritas as shares fall
Mumbai: Shares of Indiabulls firms Wednesday fell sharply after Canada-based Veritas in a report alleged serious irregularities at the group, which in turn termed the charges as "malafide and fabricated" and said it has filed a criminal case against the research firm.
"The Vertias report is 100 percent incorrect and fabricated... This is taking gullible investors for a ride by selectively leaking sensitive information, and then making money by selling such report.
"We have filed a criminal complaint against the agency as well as its author with the Economic Offence Wing of the Mumbai Police presenting the facts in the case file," Indiabulls Financial Services CEO Gagan Banga said.
Shares of Indiabulls Real Estate fell over 12 percent, Indiabulls Financial Services by 11 percent, Indiabulls Power by 11.8 percent and Indiabulls Securities by five percent.
The stocks went into a tailspin after a Veritas 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.
Stating that nobody from Veritas has contacted the company, either before writing the report or before releasing it to the select brokers, Banga said, "their modus-operandi is to selectively leak the report and make money by selling it later. It's a brilliant (way) to hammer some stocks and make money out of that."
Canada-based Veritas had hogged the limelight in recent months with its equally damning reports about other Indian entities -- Reliance groups, DLF and Kingfisher.
When asked whether the research firm contacted Indiabulls for its research report, Veritas' Neeraj Monga, who has authored most of these reports, said in an emailed reply that it depended on publicly available information.
Asked whether Veritas had heard anything from Indiabulls after the report was published, Monga said, "based on the media reports, I believe we will be hearing from them."
Earlier in the day, Indiabulls termed the report "as false and factually incorrect data aimed at creating sensation and entice people for benefitting through trading, for the sole purpose of selling their research reports for money."
Claiming that the report contained intentional error on basic factual data, which is resulting into loss for thousands of shareholders, Indiabulls said the erroneous figures demonstrate "the malafide intentions and criminal actions under the IPC. We firmly believe that this is not an oversight but an intentional act for profiteering."
In a detailed rebuttal of the points made in report, Indiabulls said, "the allegations made are factually incorrect and have ignored disclosures in public domain made through the annual reports of FY11 and FY12, which have also been circulated to all shareholders."
Veritas report said public disclosures made by IndiaBulls Real Estate and IndiaBulls Power are unreliable and the sole purpose of Indiabulls Real Estate "is to bulk institutional and retail investors for the benefit of select insiders."
The report further said the controlling shareholders of "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 local courts, exchange filings, annexure details etc, for its report.