A significant portion of broker shareholders of Delhi Stock Exchange (DSE) have issued notices calling for an extraordinary general meeting (EGM) to decide on winding up of the company. They want the board to apply for voluntary winding up under the new framework announced by the Securities and Exchange Board of India (Sebi).
“We have also sent a copy of notice to Sebi,” said BB Sahney, one of the senior-most shareholders and a former director of DSE. Broker shareholders hold 49% in the exchange while corporate and institutional holders own the remaining.
Sahney said the latest move is the culmination of a series of run-ins between minority shareholders and the management led by chairman VK Gupta and his deputy MN Verma. In December, in an unprecedented event, that caught the management by surprise, the shareholders rejected the balance sheet and the profit and loss citing irregularities and fraud.
“There was a secret ballot and the resolution was rejected with overwhelming majority,” Sahney, who has been a DSE shareholder for five decades, said. VK Kapur, a shareholder, said, "The accounts did not present a true and fair state of the company in terms of accounting standard (AS) 10, auditor's qualifications over the years about discrepancies in fixed assets and certain disclosures to be made."
Following this the management called an extraordinary general meeting with the specific agenda to pass accounts. MN Verma, a retired revenue service officer and vice chairman, DSE said, “We had not anticipated such a move by a small group of shareholders. So, the accounts were not passed in AGM. Following this, we consulted with lawyers and other shareholders and called for an EGM. In this EGM, we had the proxy from big shareholders such as Omaxe and Parsvnath, who hold several lakh shares each. With these proxy votes, the accounts were passed smoothly.”
Paramjeet Singh, another shareholder, who was present at the EGM contests this version. According to him, the resolution was not proposed at all, neither was it seconded. “The proxy comes into play only after the voting commenced. But the chairman just said the resolution is passed and left the dais. That is not valid under law,” Singh said.
Singh alleged that the management has employed staff with hefty packages while the exchange is not functional for the past seven years. “There are technology officers and HR personnel drawing salaries of Rs 2/3 lakh per month. What is the need for such staff when there is not a single share traded for the past seven years.” Verma denied allegations of irregularities and said the dispute was over not providing for a missing asset worth Rs 11 lakh, which was decided to be provided in the current year.
But shareholders are worried about eroding value. Sahney said the value of DSE shares are plummeting. “Each share has a book value of Rs 60 but market price is less than Rs 15. Who will buy when they are seeing value being scrapped from the exchange in this manner. We left the exchange with Rs 100 crore in reserve, every year they are depleting it. This year they have shown losses of Rs 11 crore. What is the scope for such a huge loss when there is no trade?” he asked.
The exchange has been trying for a few years now. Floated in June 1947, DSE was second only to the Bombay Stock Exchange in its heydays. In the 1990s it had as many as 3,895 companies. However, the advent of computerized trading and requirement of demutualisation stalled the growth.
Hopes of a revival reached zenith in 2007, when the exchange attracted interest of a few corporate shareholders and the demutualization process, where broker holding was brought down to 49%, was completed. Demutualization is a process by which a mutual company owned by its users/members converts into a company owned by shareholders.
DSE had also begun talks with other regional exchanges that have shut down to bring members and companies of these exchanges into its fold. Financial Technologies of India Ltd, Passport Capital Llc, a US-based private equity fund; Bennett, Coleman and Co. Ltd (BCCL); Television 18 Ltd; New Delhi Television Ltd; and realty firms such as Parsvnath Developers Ltd and Omaxe Ltd are among key shareholders.
Trading has not picked up despite repeated attempts.
Stiff competition and lack of liquidity are not allowing volumes to pick up, said Verma. “It is a platform business. We have tied up with London Stock Exchange for technology support. But, due to stiff competition, volumes have not picked up. We are trying,” he said.
HEATED EXCHANGE
- Accounts for FY12 rejected by shareholders in AGM on December 27, 2012
- Extraordinary general meeting called by the management headed by chairman V K Gupta
- Accounts declared as passed with proxy support; shareholders cry foul
- Broker shareholders allege mismanagement, irregularities
- Brokers issue notice for voluntary winding up under new Sebi rules
