Veritas takes the war to Indiabulls

Neeraj Monga, the Veritas analyst who tore apart Indiabulls over its disclosure standards, financial reporting and corporate governance practices, was at it again on Thursday.

Veritas stands by its research, which is based on publicly available documents that anyone can access, and has not violated any industry practice, he said, refusing to yield to the Rs19,320 crore conglomerate’s counter-offensive.

Indiabulls has charged Monga with distorting facts and presenting erroneous data for fulfilling his personal agenda of profiteering.

In a statement to stock exchanges, it said police has booked Monga and Nitin Mangal, the two analysts who wrote the report, and Veritas Research Corporation under Sections of 383, 384, 420, 500, 506, 511 and 120B based on its complaint (FIR No 99), filed Wednesday. Based on the complaint, Mumbai Police Crime Branch too has lodged an FIR against Veritas and the analysts under section 384, 420, 500, 506, 120B, 66A, B, C of IPC and section 75 of the Information Technology Act, an Indiabull’s spokesperson said.

“Indiabulls officers filed a complaint to the police against the malafide Veritas report along with an email evidence where Neeraj Monga has demanded money through his personal email and that if monies are given in time then he would hold back the report,” the filing said.

The Canadian research agency denied the allegation.

“We have not contacted Indiabulls before or after our research was published. Indiabulls appears to be basing its complaint on an email from Prashant Periwal, a fund manager from Altima Partners in London who owns Indiabulls group stock and who contacted us for our research. Veritas’ commercial practices are of the highest standards and integrity. We are disappointed that Indiabulls is attempting to discredit our company and us individually, rather than addressing the issues outlined in our research,” Monga wrote in an email to DNA.

Interestingly, Indiabulls, too, said the two analysts never spoke to any of its officials for any clarification or fact and never visited any of its power plants or real estate sites before releasing their commentary. “The Veritas report has been published with gross incorrect data (not interpretation of data but factual data) about each of its three flagship companies,” the filing said.

Monga assured that factual errors, if any, would be corrected.

The Veritas report had alleged that the sole purpose of Indiabulls Real Estate is to “bilk” institutional and retail investors for the benefit of select insiders.

Indiabulls said the allegations  ignore the disclosures made by the company in its annual reports.

The shareholding of Indiabulls Real Estate in Indiabulls Power, through the Indiabulls Infrastructure Development merger, actually increased from 53.20% to 53.97% rather than falling from 62.34% to 52.54% as mentioned in the Veritas report, it said. It also claimed that Indiabulls Infrastructure’s merger with Indiabulls Power enhanced its networth by Rs1,045 crore, contrary to the Veritas report that said there has been no increase in networth.

Veritas had alleged that the merger is not only a means of transferring value from the public shareholders of Indiabulls Power to a select few, but also that any boost to Indiabulls Power’s networth claimed by the management post-merger is unverifiable.

Indiabulls also strongly dismissed Veritas’s observation that Indiabulls Financial Services recognised 33% of its profit before taxes from interest income on loan given to the group’s employee welfare trust (EWT).

“The figure of NII (net interest income) arising out of EWT is Rs18 crore, which is less than 1% of total NII of Rs1,866 crore for the company. The same being projected as 33% of profit before tax in headlines demonstrates the malafide intentions and criminal actions under Indian Penal Code. In our opinion, such intentional error on basic factual data is resulting in losses for thousands of shareholders. We firmly believe that this is not an oversight but an intentional act for profiteering,” said the group.

However, Veritas clarified that there has been a misinterpretation of their release.

“It is our contention that interest income should not be recognised by Indiabulls. The company has the right to disagree, but that doesn’t mean we are sensationalising our report,” it said.

The Indiabulls spokesperson also said the report was released to a select group of people ahead of its release to the public, and that was partly responsible for the gradual decline in the stock price over the last few days.