Brothers in Arms, misappropriating a fortune – the full version. Reliance Industries Ltd. & Reliance Communications Ltd. (July 18, 2011, 45 pages) – Neeraj Monga nmonga@veritascorp.com, varun raj vraj@veritascorp.com Misappropriating a fortune.
Jim O’Neill of Goldman Sachs created the BRICs (Brazil, Russia, India, and China) moniker in early 2000, igniting the world’s imagination to the potential riches available to brave investors in large emerging markets far way from North American climes. However, the economics of forecasting differs from
the nitty-gritty of investing, and therefore, international investors have suffered both politically (BP in Russia, Google Inc. in China) and financially (Yahoo Inc. and Softbank in China), and more recently, investors have taken a bath on Sino-Forest – a forestry company domiciled in Canada with operations in
China.
Then there is India, the land of the Taj Mahal, the Raj, Yoga, democracy and supposedly “rule of law”. The western media has been recently enamoured with the enormous wealth of Indian billionaires and a rapidly rising middle class with its insatiable needs, giving rise to the next great consumer economy of
the world. It is our contention that notwithstanding the many positives of a growing Indian economy, corporate governance, accounting standards and disclosure practices adopted by some of India’s prominent companies are questionable.
Reliance Communications Limited. (“Reliance”, the “Company” or “RCom”) is the poster child of everything that is wrong with corporate India, and irrespective of management’s assertions about “values” and “integrity” in
various annual reports, we find no credible evidence of either in its financial statements or those of its former parent, Reliance Industries Limited (“RIL”). Doubts about management’s integrity and the short shrift to shareholders arise right at inception, when the demerger from RIL was undertaken on August 31, 2005, and the Company was listed on Indian bourses on March 06, 2006. In the intervening period, ownership of promoters ballooned from 38.27% to 63% in RCom, under the guise of improving shareholder value and transparency1
We firmly believe that the 821,484,568 shares issued to management, as per the “Scheme of amalgamation and arrangement involving reorganization” (“Scheme”) of the group telecom business, as approved by the High Court of Bombay and Gujarat vide orders dated July 21st, 2006 and July 18th, 2006, should be nullified2
Read on…http://xa.yimg.com/kq/groups/5893933/2126339805/name/Veritas+-+RIL+RCom.pdf