Veritas, which has slammed governance standards and accounting practices in large promoter groups such as Reliance, UB Group and DLF, often attracting questions of credibility and unholy motives from the target companies, has turned its focus on the Indiabulls group. In a report titled ‘Bilking India’, Veritas analysts Neeraj Monga and Nitin Mangal have accused the controlling shareholders in the group’s three listed entities of weaving an “intricate web of related party dealings” that is almost “impossible to unravel.”
Indiabulls, however, was quick to hit back. A company spokesperson said the report was factually incorrect and was intended to make personal gains. The company has filed a criminal complaint against Veritas for “causing losses to thousands of investors through the baseless report”. The Gurgaon police admitted the complaint and registered a first information report against Veritas, Indiabulls said. “The basic errors on factual data are intentional on the part of Veritas. We understand that Veritas reports are sold for money and are not free and unbiased reports. The heavy bias for creating sensationalism for personal profiteering is the reason behind their gross headline errors,” said the spokesperson.
Shares of three Indiabulls group firms fell between five and 20 per cent in early trade after the Canada-based independent research firm Veritas raised questions about the governance practices in the group. However, a detailed clarification by the group in the afternoon soothed investors’ nerves, resulting in the shares regaining most of the lost ground. All three group firms Indiabulls Financial Services (0.8 per cent), Indiabulls Real Estate (2.42 per cent) and Indiabulls Power (3.2 per cent) ended in the red.
According to Veritas, “By not consolidating many subsidiaries in its publicly filed financial statements, the management has cherry-picked profits and excluded egregious losses.” It advised investors to sell all Indiabulls group stocks. “Sell all stocks of Indiabulls group. The group has mastered the art of ‘Bilking India’,” Veritas said, adding investors seeking reliable and credible information on Indiabulls Real Estate and Indiabulls Power cannot depend on the reported financials of the two companies. The report also recommended a change in management and demanded “the financials cleansed of malfeasance”. Unless these steps are taken, “we would not buy Indiabulls Real Estate and other related group entities at any price,” the analysts said.