List of 87 Companies that have Vanished after raising funds through IPO in India

This is probably one of the hottest topics in the Indian Stock Market today. Every year hundreds of companies submit applications with SEBI (Securities & Exchanges Board of India) and a % of those companies manage to raise funds through Initial Public Offerings or IPO's. Indians are a notoriously smart bunch of guys who try to find out new and ingeneous ways of cheating others. Though the stock market regulator (SEBI) has strict norms and filtration criteria before they actually allow some company to issue an IPO, some crooks manage to find a way to go around the checks. They eventually offer IPO's and once investors buy their shares they just disappear. Recently the Ministor of Corporate Affairs Mr. Sachin Pilot, in a written reply to the Rajya Sabha has said that a total of 238 firms have been featured in the "List of Vanishing Companies" at the end of the financial year 2011-2012. The purpose of this article is to understand what is meant by vanishing. None of the news articles in the Internet actually listed down those 87 companies that cheated Indian Investors of their hard earned money. I did some digging and was finally able to find that information in the Ministry of Corporate Affairs website hidden away in some corner. So, for the benefit of all the Indian Investors who follow my blog - here is the list...

Before We Begin:

The following are some old articles in our blog that covered the topic of Initial Public Offering. You can revisit them to brush up your memory if you arent too sure about the IPO Process.

1. IPO Process Explained
2. Intermediaries involved in an IPO Process
3. IPO - Different Types of Issues

When is a company considered "Vanishing"?

A Company is considered "Vanishing" if it fails to file their financial statements, their operational details etc with SEBI on a quarterly basis. If a company fails to file its statements, SEBI tries to contact them at their registered office and if that too fails, SEBI tries to reach the directors of the company directly. If all of the 3 steps fail, a company is considered "Vanishing" which means SEBI does not know where the company is or what it is doing with the money that investors put into it during the IPO Process.

Did SEBI Miss all 238 Companies as mentioned in the first paragraph?

Actually, NO.

Of the 238, 151 companies have been traced. Of the 151, 31 are currently under liquidation. Which leaves us with "87" that still remain untraced.

What are the Government and Market Regulators Doing about this?

Mr. Pilot has said that government has been taking action against companies and their directors which disappear after raising money from public. He said that a central coordination and monitoring committee, co-chaired by ministry of corporate affairs chairman and market regulator SEBI monitors efforts to identify "vanishing companies" and take stock of action against them. The minister said that government is seeking assistance of police authorities and filing FIRs. He also said that, based on feedback from all stakeholders, procedural adjustments will be made in the IPO Process to minimize such situations in future.

Do we have a list of those 87 Companies that have Vanished this year?

The list contains the Name of the Company and the amount of money (In Rs. Crores) they raised via their IPO.

Name of the Company	Issue Size in Crores (Rs.)
Aditya Alkaloids Ltd	3.55
Aashi Industries Ltd. (Formerly Known as Aashi Pharmachem Limited	5.52
Ambuja Zinc Ltd.	2.14
Amigo Exports Ltd	3.3
Asian Vegpro Industries Ltd	7.09
AVR Securities Limited	2.47
Bhavna Steel Cast Limited	2.1
Bodh Gaya Ceramics Ltd	0.49
Caldyn Aircon Ltd.	4.45
Canara Credit Ltd	2.49
Carewell Hygiene Products Ltd.	2.49
Chhakri Tyres & Tubes Ltd Or Rhino Tyres Ltd) (Presently Known as Raam Tyres Ltd	9.59
Cilson Organics Ltd.	8
Citizen Yarns Limited	2.2
Crestworld Marines Ltd	4.38
Cromakem Limited	3
Daisy Systems Limited	1.31
Deccan Petroleum Ltd	4.57
Flora Wall Coverings Ltd	5.82
Frontline Financial Services Ltd.	4.43
Genuine Commodities Development Co. Ltd	2.68
Girish Hotels Resorts and Health Farms Ltd.	2.59
Global Blooms India Ltd	2.1
Global Exhibitions Limited. (Formerly Known as Global Network Limited )	4.45
Growth Agro Industries Ltd.	5.4
Hallmark Drugs & Chemicals Ltd. (Formerly Known as Lifeline Drugs Limited)	7
Hi-Tech Drugs Ltd	3.23
Hitesh Textile Mills Ltd.	7.48
Hoffland Investments Limited (Formerly known as Vadra Investments Limited)	2.9
Ichakalanji Soya Ltd	2
Imap Technologies Limited	1.8
Kamakshi Housing Finance Ltd (Presently Known as Kisha Impex Ltd	5.71
Kedia Infotech Ltd (Formerly known as Grives Hotels Ltd.)	4.98
Kesar Greenfield International Limited	5.69
Kiev Finance Ltd	12
Lyons Industrial Estate Enterprises Ltd. (Formerly Known as Lyons Range Finance Ltd.]	6.37
Ma Capital Market Services Ltd	1.44
Madhyavart Exxoil Limited	2.3
Manav Pharma Ltd	5.3
Marine Cargo Company Limited	3.41
Nagarjuna Jiyo Industries Ltd	2.73
Naisargik Agritech ( India) Ltd	4.66
Naturo Pest Ltd	4.84
Nishu Fincap Ltd (Formerly Known as Medha Finance and Securities Ltd)	4.25
Ocean Knits Ltd	2.61
Oriental Remedies and Herbals Limited	1.88
Orpine Systems Limited	2.71
P K Vaduvammal Finance & Investments Ltd (Presently Known as Novel Finance (I) Ltd)	1.5
Panggo Exports Ltd	2.47
Pashupati Cables Limited	11.95
Protech Circuit Breakers Ltd	2
Protech Switchgears Limited	2
Pur Opale Creations Ltd (Formerly Known as Nuline Glassware ( India) Limited	6.78
Rajadhiraj Industries Ltd	2.5
Realtime Finlease Ltd	3.75
Rizvi Exports Ltd.	3.65
Rusoday & Company Limited	0.94
Sai Graha Finance & Engineering Ltd	4.05
Saket Extrusions Ltd	2.13
Sequel Soft India Limited
Shefali Papers Ltd.	2.57
Shree Vaishnavi Printing & Dyeing Limited	3.24
Shree Yaax Pharma & Cosmetics Ltd	6.06
Shreeji Dyechem Ltd	1.94
Shri Mahalaxmi Agricultural Developments Co. Ltd	5.09
Shyam Printers & Publishers Ltd	2.25
Sibar Media & Entertainment Limited	3.5
Sibar Software Services ( India) Limited	3.5
Siddhartha Pharmachem Ltd.	12
Simplex Holdings Ltd.	2.27
South Asian Mushrooms Ltd	6.1
Sparkle Foods Ltd	5
Spil Finance Limited	5.7
SSK Fiscal Services Ltd.	2
Star Electronics Ltd.	2.47
Sterling Kalk Sand Bricks Ltd.	4.44
Sukhchain Cements Ltd. ( Formerly Known As Ganapati Cements Private Limited)	3.65
Super Domestic Machines Ltd	5.55
Sushil Packagings ( India) Ltd	4.52
Swal Computers Limited	2.6
Tirth Plastics Ltd	5.03
Topline Shoes Limited	7.8
Universal Vita Alimentare Ltd.	1.8
Vidiani Agrotech Industries Ltd.	2.80
Vipul Securites Ltd	3
Visie Cyber Tech Limited	1.4
Zed Investments Ltd.	2.8

Source: http://www.mca.gov.in/Ministry/vanishing.html

As you can see, all of these are ultra small sized IPO's where the largest IPO was only 12 crores and the smallest was 49 lakhs. Market Guru's always warn investors to stay away from Penny Stocks. They have the potential to give you triple or even four digit profit % returns but at the same time, your entire investment can go down the drain. The latter is what has happened to the investors who bought shares of these 87 cos.

Happy Investing & Stay away from Penny Stocks!!!

How to Gift Shares to our Family Members and the Tax Implications of the same

Are you an avid stock market investor? Do you have a sound stock market portfolio? We all know what a Nominee is – someone who gains possession of your property/investment after your time. But, what if you wanted to give your stock investments in an as-is state to someone? The first question that will arise in your mind is – “Can I really do that?” the second will be “How?” and the third will be “What will be the tax implications?”

Isn’t it???

The purpose of this article is to answer these questions…

Can we Gift Shares to our family members?

Of course YES. Do you think that I will waste my time and yours as well over something that can’t be done???

You can gift equity shares (stocks) that you own to anyone in your family. The person giving the gift is termed the donor, and the person receiving the shares is termed the donee.

Let us say, I own 100 shares of ICICI Bank and want to gift it to my brother. I will be the Donor and my brother will be the Donee. Once the transaction or should I say gifting is complete, my brother will own those 100 shares instead of me.

How to Gift Shares to our Family Members

Since we are gifting shares and not selling them, technically this transaction happens outside the market and there is no transfer of monetary instruments. Below are the steps to transfer shares held in both DEMAT as well as Paper form.

Gifting Shares – In DEMAT Form:

Step 1: The Donor initiates an off-market transaction with his Depository Participant (DP) (In other words DEMAT Account provider) by submitting a Delivery Instruction Slip (DIS) to transfer securities from his DEMAT Account to that of the Donee.

Step 2: The DIS should have the name of the Donee, details of his DP Account, the Security (Share/Stock) being transferred, ISIN Number of the company and the quantity of shares being transferred/gifted.

Step 3: The Donee must give a receipt instruction to his DP (DEMAT Account Provider) to accept these shares

Step 4: Though this step is not mandatory, it is best to execute a gift deed on a non-judicial stamp paper my mentioning the appropriate amount for legal records as well as to avoid any tax queries in future.

Gifting Shares – In Paper Form:

If the shares are in certificate form, a share transfer deed in Form 7B, filled and signed by the donor, needs to be executed and registered. The stamp duty is payable at the rate of 25 paisa for every Rs 100 of the face value, or the market value of shares prevailing on the date of the document, whichever is higher. Once the transfer deed is registered, the share transfer is complete.

Tip:

Holding shares in paper form is not only outdated, but also very hard to maintain. It is easier to maintain share holdings in electronic format in DEMAT Accounts. Converting paper shares into DEMAT is very easy and can be done for a small fee by the DEMAT Account provider. So, I would suggest, you do this before you actually think about gifting or even selling your paper form shares.

Important Note:
The details mentioned in the delivery instruction slip and receipt instruction for off-market transfer must match, otherwise the transfer will not take place.

Tax Implications of Gifting Shares

There is not much clarity about the Gift Tax laws in India. About 10 years ago, any amount received as a gift from a family member was exempt from tax, then a few years ago, the government changed it and put a ceiling of Rs. 50,000/- and then they changed it again stating that, gifts received from Blood Relatives and Family Members is exempt from tax.

So, as of now and per my understanding, if you gift Shares/Stocks to your blood relatives or family members they need not pay any tax on the gift they just received.

Who is part of this Blood Relatives or Family Members category?

The following members will fall under this category of people who need not pay taxes if you gift them Shares that you own.

• Spouse of the individual
• Brother or sister of the individual
• Brother or sister of the spouse of the individual
• Brother or sister of either of the parents of the individual
• Any lineal descendants of the individual or his/her Spouse. Ex: Children, Grand Children, Great Grand Children etc...
• Any lineal ascendant of the individual or his/her Spouse. Ex: Parents, Grand Parents etc...
• Spouse of the Brother/sister of individual or brother/sister of spouse of individual

Does this mean I cannot gift/transfer shares to anyone else?

Of course Not. You can gift/transfer your shares to people who are not part of your family – say Friends. However, if you do so and if the value of the shares being gifted is more than Rs. 25,000/- it will be taxed. The amount in excess of the Rs. 25,000/- limit will be considered Taxable Income for the person receiving your gift and will be taxed accordingly. You can learn more about the Indian Income Tax by Clicking Here

Important Note:
Though the shares are non-taxable in the hands of the receiver when gifted by a family member, they need to pay capital gains tax when they eventually sell it. So, if you decide on selling the shares that I gifted you, you need to pay capital gains tax on it, as per the prevailing tax laws at the time of selling the shares.

Some Important Points to Remember:

a. DEMAT Providers may charge a small fee for effecting this transfer of shares from person A to person B. The fee will vary based on who your DEMAT Provider is.
b. Registering the gift deed is a great idea if the value is significant (Over Rs. 10,000/-) to minimize tax complications for the receiver of the gift
c. If you hold shares in paper form which you wish to transfer to any of your family members, converting them to DEMAT form would be a better idea
d. Though you can gift shares to non-family members too, it will be taxable if the value is over Rs. 25,000/-

Hope you found this article useful…

Happy Stock Market Investing or should I say Stock Gifting!!!