A portfolio bigger than Jhunjhunwala’s, sans buying a single share
One of India’ s biggest non-promoter shareholders got there without buying a single share. And the growth shows no signs of slowing down. But there’s no new Warren Buffet tin Indian markets.
The beneficiary of this bulging de mat account is the Investor Education and Protection Fund( IE PF ), setup under the Ministry of Corporate Affairs, with the main objective of promoting investor awareness and protection.
Its new status as a leading shareholder of India Inc is due to a rule which has become operational recently. By that investors who don’ t claim dividends have their shares transferred to the IEPF.
The total value of such shares transferred since then has crossed ~188.7 billion till July 2018, shows the answer to an application that Business Standard filed under the Right to Information( RT I) Act.
This dwarfs the value of billionaire Rakesh Jhunjhunwala’s public portfolio, which was worth ~123.33 billion as of the end of the June quarter—the latest available for all companies.
Jhunjhunwala’ s share holding includes the value of his stake in companies where he owns 1 percent or more.
The IE PF authority also shared that in addition to the ~188.7 billion, the value of unclaimed dividends transferred in financial year 2018-19 is ~458.1 million, according to the data till July 2018.
Virendra Jain, founder of Midas Touch Investors Association, said the provisions of transferring securities and dividends to the IE PF were against the interests of investors. The issue of unclaimed securities and money is between the company and its shareholder; the government should not be taking shares away from the accounts of investors just because they haven’ t claimed dividends, said Jain. “This amounts to a method of usurping an individual’ s property ,” he said, suggesting the provision maybe open to legal challenge.
Some feel otherwise. Such shares tend to be safer with the government than with companies themselves or with intermediaries, said Suresh Surana, founder of RS M Astute Consulting, which helps companies with legal and compliance services. Shares with dorm ant accounts and unclaimed shares have previously fallen prey to unscrupulous entities among private intermediaries, he pointed out. “It does become more susceptible to fraud,” said Surana.
The move to make such transfers to the IE PF came after cases of fraudulent share transfers surfaced. The Securities and Exchange Board of India had de barred registrar and share transfer agent Share pro Services in its March 2016 order. It noted that unclaimed dividends and shares had been fraudulent ly usurped from shareholders’ accounts.
Pavan Kumar Vijay, founder and managing director at legal and financial consulting firm Corporate Professionals (India ), also said investors might benefit since everything was consolidated if they wanted to claim old shares or benefits .“All the shares are in one place,” hesaid.
Investors can reclaim their shares, dividends, and other money by making an application requesting for it. The amount is credited back to the investor’s account after the company verifies the request, the guidelines on refunds say.
But few investors have got their money back, probably because they are not aware of how to go about the process of claiming dividends and shares, say experts.
The data requested under the same RTI application shows there have been 8,257 requests from investors as on June 30, 2018, to reclaim their shares and dividends. The value of unclaimed shares and dividends returned to shareholders is ~13.4 million. This works out to less than 0.007 per cent of just the value of shares credited to the IEPF.