Indiabulls managed to sidetrack entire issue: Veritas’ Neeraj Monga

    Priya Sheth
    K.S. Badri Narayanan
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Many Indian companies have excellent governance

Canadian research firm Veritas Investment Research’s reports hit companies where it hurts most. With back-to-back Veritas reports questioning practices of different companies, the word ‘corporate governance’ has attained ‘nirvana’. After DLF, Kingfisher and RCom, Indiabulls group is the latest victim of ‘corporate governance bashing,’ as people are calling it.

In an exclusive e-mail interview to Business Line, Neeraj Monga, Executive Vice-President of Veritas, spoke about the corporate governance practices in India.

Downgrades by Veritas have been taken by companies seriously as they tackle the sensitive issue of ‘corporate governance.’ What do you feel about these responses?

Indiabulls has responded in an immature and unprofessional manner. By creating a fictional criminal case against us, Indiabulls has proven to be the corporate governance nightmare that our report said it is. It has indulged in slander by accusing me personally of demanding money. I quote from its BSE filing, “Neeraj Monga has demanded money through his personal email and if monies are given in time he will hold back the report.” Indiabulls will be unable to prove this in a court of law, and will have to pay significant damages for reputational and economic harm.

To the extent there is an inadvertent error in our report, we will correct it. But the manner in which Indiabulls has treated our research and responded to it illustrates utter contempt for genuine debate and engagement. Moreover, instead of addressing the issues raised in our report, it has managed to sidetrack the entire issue and convert it into a boxing match in the media.

What is the ‘inadvertent error in your report’ on Indiabulls?

The possible error relates to equity ownership dilution at the time of IIDL-IBPOW merger.

What do you think of Indiabulls’ full-page advertisements?

The advertisement is unnecessarily confusing the public without answering the questions we raised. The fact it cannot point to another factual error, implies Indiabulls is making an attempt to distort our report. Everything in that advertisement is the company’s opinion

Do you think it is easier for a firm based overseas to come out with such reports rather than an India-based firm?

Perhaps it is true. The fact that a management team has been able to convert an intellectual exercise into a criminal act through financial or other muscle suggests that in spite of India portraying itself as an investment-friendly and law-abiding jurisdiction, it is run as a fiefdom of the powerful. Debate is the essence of democracy.

How many Indian companies have been following high corporate governance standards?

Many have excellent governance. Our next report will highlight one such company.

What ethical standards do you or your firm follow?

We are working hard every day to write the best possible research. We don’t cheat anyone and nor do we fleece anyone. Our track record on Indian equities has been spot on so far.

RCOM’s IPO in Singapore failed. UB Holdings and Kingfisher are effectively and very publicly bankrupt. DLF has not managed to de-leverage its balance-sheet for more than a year.

(This article was published on August 13, 2012)
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Indiabulls has very well articulated their detailed-response, rebutting each and every issue raised by Veritas.

Mr Monga has made some very weird conclusions based on his own assumptions in his report and decided to project that as a research report.

Mr Monga does not dispute that he was soliciting money "personally" using his "official" email, even though its was a commercial discussion. But the commercial discussion gets "murky" when he is willing to hold the general-public release of the report for a day so that "action" can be taken before the general public investors get to know about the report.

In an interview Mr Monga has called India as a "third-world emerging market". This shows the negative bias he has on India.

Mr Monga says "DLF has not managed to de-leverage its balance-sheet for more than a year."

Mr Monga today DLF raised 2700 cr by selling 17-acreMumbai property. Is not that de-leveraging. FYI,Indiabulls has 20 acres near DLF plot, with a 3.3 msft office.

from:  Kumaran
Posted on: Aug 13, 2012 at 22:38 IST

I agree with Neeraj Monga and think IndiaBulls has taken to form over
substance by thinking that one with a more strident response will win
the argument. IndiBulls is doing more harm to itself in the process I
believe. Its Independent Director would do better to study Veritas'
reports and try to be accountable to the minority shareholders.

from:  Krishnaraj
Posted on: Aug 14, 2012 at 09:37 IST

I don't know whether Ibull's management is straight forward or not.But
one fact is that the report was leaked to some sources(For the
monitory benifit for some unknown to me) before it was published.The
evidence is, Ibulls financials was trading at about 218 Rs till 3.25
pm and in the last five minutes huge sale happened, and the price came
down to 198 Rs.All this drama happened in last five minutes of
trade.Only after market hours the report was available to the
public.So if Ibull's management is wrong, the the regulatory
authoritis should look into it.It is the responsibility of the media,
to find out who was the benificiary of the leaked report, how much
Veritas gained from it.

from:  Sunil
Posted on: Aug 14, 2012 at 18:07 IST
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