Fake shares worth Rs 2,000 cr under scrutiny

MUMBAI: The problem of fake or duplicate shares, which plagued investors during the days of physical share deliveries, has resurfaced with a vengeance. According to the initial findings of the national depositories—the National Securities Depository Ltd and the Central Depository Services Ltd—almost 50 BSE-listed companies have dematted shares in excess of their issued equity capital.According to estimates, this amount of fake shares in circulation could easily cross Rs 2,000 crore. The market regulator, the Securities and Exchange Board of India (Sebi), has been apprised of the matter and is likely to rope in the CBI for a thorough probe, said sources. Documents available with this newspaper, generated from both the depositories, indicate that 48 listed companies, including a few actively traded companies in the software and entertainment sectors, have dematted more shares than the actual number of shares issued. This means that there are duplicate or fake shares in the market. Dematting (or dematerialisation) is the process of converting physical shares into electronic format. When contacted, Sebi officials were unavailable for comment. Sources said the findings had emerged when the depositories started collating the share capital information of all listed companies following Sebi’s instructions two months ago. This step was initiated after a BSE-listed company, Design Auto Ltd, was found guilty of dematting more shares than its issued capital, thereby infusing additional shares into the system without proper listing clearances from the exchange (a mandatory procedure before dematting shares). In this case, Sebi has frozen the demat account of the company and investigations are on to find out how many excess shares of the company have been floated in the market. Sources in the depositories confided to this newspaper that this could be the modus operandi of several other companies whose dematted capital has exceeded the issued capital—a clear case of unscrupulous company promoters conniving with both depositories and exchange officials. For instance, a BSE-listed firm with 2.3 crore shares issued (issued capital) managed to demat 7.87 crore shares—a whopping 5.8 crore shares in excess faked into the system. “We have initiated a reconciliation exercise which is aimed at finding out the share capital details of all listed companies dematted with us and the amount of shares issued and dematted,’’ said a depository official. “In some cases, we have found certain differences but that may be due to corporate action like preferential share allotments which may not be reported to the depositories and exchanges. Once this exercise is complete,we will get a clear picture on the mismatches.’’