ARUN KEJRIWAL

Mumbai, Nov 16,2022:  Stock exchanges are self-regulated organisations or SROs while their regulator is the SEBI. The role of the SRO is to act in favour of the investor and at the same time, ensure that the issuer of capital or listed entities are not given a raw deal.

However, when it comes to non-compliance of rules and guidelines laid down by exchanges, action is taken against the listed entity which leads to suspension of trading on the exchange. Any such action taken, leads to hardships only to the minority investor. Exchanges need to look at such issues more closely, carefully and also with a humane touch towards the investor. The violation or non-fulfilment of guidelines has not been done by the investor, so why punish him.

The first thing that needs to be done is freeze the shares of the promoters of the company. Secondly, the promoters need to be debarred from trading in the stock exchanges until they fulfil the requirements. As a third step, any losses suffered by investors should be made good from the seized or frozen shares. All this may take some time and the regulator will also have to step in.

Till then let us look at a classic case of PTC Ltd.

PTC Ltd is listed on both the stock exchanges, BSE and NSE. It also has a subsidiary in which it holds 64.99 per cent in the name of PTC Financial Services Ltd. The subsidiary has not submitted the financial results for the quarter and year ended March 22 and the subsequent quarters ended June 22 and September 22. As a result of this non-compliance, the company PTC Ltd is not able to submit audited, consolidated results for the year ended March 22 and the unaudited consolidated results for the quarter ended June 22 and September 22. The NSE, as the SRO, has sent the company a notice stating that trading in the shares of the exchange would be suspended.

The question that arises is why should the minority investors suffer. The promoters of PTC Ltd are from the power sector PSU companies. Four such companies, namely the NHPC, the PFC, the Power Grid and the NTPC Ltd hold 4.05 per cent each of the company. This means they own 16.22 per cent.

In public shareholding, Life Insurance Corporation of India Ltd owns 5.96 per cent while FPIs own 31.67 per cent. As a company, PTC has done no wrong. Why make investors of this company who hold 83.78 per cent suffer?

Coming to PTC Financial Services Ltd, the promoter is PTC India Ltd who owns 64.99 per cent of the company. The balance shareholding of 35.01 per cent is widely scattered.

The question arises that why could PTC India Ltd not enforce compliance in a company in which they own 64.99 per cent of the share capital? Why have they been seeking time, again and again for submitting results for the March quarter which were to be submitted by June 2022. Is the exchange justified in putting all the minority shareholders at risk and difficulties in a case where they (investors) have nothing to do?

This issue throws up a number of questions and the SROs and the regulators need to look at it afresh. Suspending trading in the share is a double whammy to the minority shareholder.