The Hindu Business Line : Small investors dogged by dud shares: Survey

SMALL investors are left holding shares, which are now mostly pieces of worthless paper. The Indian Household Investors Survey released today revealed that almost 38 per cent of those surveyed held shares in delisted companies.

The survey, sponsored by the Investor Protection & Protection Fund under aegis of the Ministry of Company Affairs, was probing retail investors' worries based on direct interview of 5,908 household heads.

Most of the companies delisted by stock exchanges were due to violation of listing agreement, implying corporate mis-governance. As per the findings, well over one-third (38 per cent) of the respondents were shareholders of delisted companies.

Applying the same percentages to the total number of share-owning households in India meant that around 30 lakh households would be having shares of some delisted companies, the survey stated adding, "this is a frightening figure. Many of these would be dud companies, but not all."

The number of delisted companies was as high as 2,000 to 3,000, in addition to the Z-group companies. According to the survey of the respondents who held shares in such entities, 80 per cent complained that such shares were unsaleable, 60 per cent said that share value had been destroyed, 53 per cent stated that such companies did not pay dividend and 63 per cent complained that they do not get annual reports.

As regards the investors' perception about corporate governance, a large percentage (around 50 per cent) of the respondents had a negative opinion about company management. Interestingly, the household investors opinion, according to the survey, was `dominantly' negative about company auditors too.

However, there was some hope for the authorities responsible for investor protection, as more than one-half of the respondents were positive about efforts being made to improve corporate governance.

Another interesting aspect was that a majority of retail investors in India do not regard mutual fund equity schemes as a superior investment alternative to direct holding of equity shares. It was found that percentage of households who owned equity shares directly was more than 2.5 times the percentage of those who are in any mutual fund scheme.

According to the survey, the mutual fund equity schemes accounted for well below one-fifth of total assets under management of mutual funds in India. Retail investors overwhelmingly prefer bank deposits rather than liquid/money market funds, the survey revealed.

Releasing the survey, the Secretary, Ministry of Company Affairs, Ms Komal Anand, said there was a need to make India a nation of investors from being a nation of savers.

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