Agencies
Mumbai, August 8: India imposed trading restrictions on 162 listed entities identified as shell companies, a surprise move that analysts said was part of a broad crackdown on illegal offshore transfers and tax evasion. The companies were among the 331 “suspected shell companies” referred by income tax department and Serious Fraud Investigation Office (SFIO) to regulator Securities Exchange Board of India (SEBI) for further action. The announcement by SEBI late Monday did not say what illegal activities the companies may have been engaged in.
The restrictions include limiting trading in the affected companies to once a month and curbs in the trading of shares held by the promoters and directors of the companies.
While share trading by the 162 companies has been restricted others may soon face similar or even stricter curbs, the regulatory and market officials said.
The government has been going after companies it suspects of engaging in irregular transactions since demonetisation last year.
Some analysts said the trading restrictions had taken investors by surprise. “(Investors) should wait for the full facts to emerge,” Amit Tandon, founder and managing director of shareholder rights group Institutional Investor Advisory Services, said in a chat room operated by Reuters.
“If these companies indeed have been used for money-laundering, then strict penal action needs to be taken. If not, they need to be excluded from this order,” Tandon said.
Several companies Tuesday petitioned the stock exchanges against being tagged as ‘suspected shell companies’. Many of these companies tagged along their annual reports and other financials to press upon the exchanges that they are not shell companies and are in compliance with all regulations, while many were contemplating approaching Sebi directly or even file appeal with the Securities Appellate Tribunal, among other legal options.
The move spooked overall market sentiments on fears about possible action against more such firms. The benchmark Sensex slumped 260 points while the Nifty cracked below the crucial 10,000-mark.
Most suspect shell cos in WB
New Delhi: West Bengal accounts for the largest number of companies on the list of 331 suspected shell firms, referred by income tax department and Serious Fraud Investigation Office (SFIO) to regulator Sebi for further action. Besides, Gujarat and Delhi also account for a large number of such firms, against which the capital market regulator Sebi has recommended trading restrictions by the stock exchanges. These companies include Parsvnath Developers, J Kumar Infraprojects, Orissa Sponge Iron and Steel, Birla Cotsyn, Prakash Industries and SQS India BFSI Ltd. While at least 124 companies are believed to be under scanner for alleged tax evasion, further 175 firms were being investigated by the SFIO. An analysis of the list shows that at least 127 West Bengal-based companies are on the list, while there are 50 from Maharashtra and more than 30 from Gujarat and Delhi each. There are also companies from Orissa, Assam, Karnataka, Andhra Pradesh and Tamil Nadu.
