Readings: Mutual funds variety, Brokers’ losses, Reverse Book Building
- Hindu Business Line: Indian mutual funds shop globally to woo locally
- Business Standard: Brokers carry forward losses
A good number of non-banking financial companies (NBFCs) belonging to big brokerages are keeping themselves from announcing a one-time hit by losses arising out of margin funding following the market meltdown in the early part of this calendar. Instead, the broking houses are carrying forward these huge losses as loans under recovery, and announcing only minuscule bad debts.
Through this move, say experts, these broking firms can avoid making huge provisions for losses and, to a great extent, neutralise a possible negative impact on their share prices. Stock prices normally take a hit if a company’s provisioning or writedowns is huge, they say.
“However, when the market crashed, the entire system collapsed like a pack of cards, leaving the broking houses with piles of bad debts,” explains a dealer, while stressing that the margin-funding business is now down by over 60%.
Ah, the wonders of accounting!
- Sucheta Dalal: Anti-investor Moves
Corporate India has lobbied to scrap RBB ever since it was introduced. No company wants retail investors to have a say in its decisions. Investors, on the other hand, are dead against such a move. Corporate India alleges that a handful of investors can form a cartel and dictate the price because SEBI rules do not mandate minimum shareholder participation. This is debatable. There is nothing to stop companies from making an effort to ensure shareholder participation. In any case, companies make an RBB offer only when they have mopped up 90% of the floating stock.
