Why analysts, investors should play Oliver Twist
Sukumar Ranganathan -
Wednesday, January 21, 2009 9:40 AM
Are happenings at Satyam Computer Services Ltd, where founder Ramalinga Raju revealed on 7 January that he had, over the years, fudged the companys books to the tune of at least Rs 7136 crore encouraging analysts and investors to ask for more information on companies?
Indian companies, even some of the better managed ones, are notoriously stingy with details of their operations and financials. They reveal what they choose to reveal, not what the world wants to see. But are analysts and investors getting more aggressive about this?
And will regulators step into the act?
Analysts do seem to be becoming braver.
In a Mint poll on India's best governed companies (and the not so well governed) analysts and fund managers trashed companies that are part of the Mukesh Ambani controlled Reliance Industries Ltd group and those that are part of the Anil D Ambani Group, promoted by Mukesh's estranged younger brother Anil D Ambani. To be sure, like many other polls, this didn't list responses by individuals or even name all participants.
Today's Mint carries a page 1 story on how analysts are asking for more information from RIL. The basis for the story was a report put out by Kotak Securities Ltd, probably the first time a report has had harsh words about a company that usually doesn't respond well to criticism. A sampling: "There would be "significant value in the stock at current levels if the management can improve disclosures and conclusively address some of the gaps between the Street's understanding of its (RIL's) reported financials and reported financials."
Still better, another analyst commenting on the story, Maulik Patel at KR Choksey Shares and Securities, did so on the record.
Will RIL follow the advice dished out by the analysts?
Well, Mint's own experience in recent weeks, in terms of getting companies to answer critical questions hasn't been very encouraging.
On15 January, the paper asked Wipro, TCS, Satyam, and the World Bank to answer some questions on the debarring of the second and the third companies named from World Bank contracts. The questions were based on a Fox News investigation, a Wall Street Journal story, and Mint's own reporting.
To date, there has been no answer from any of the firms.