Save the interest of Minority Shareholders from Promoter Abuse of Corporate Governance in Publicly Traded Corporations - As evidenced in Hinduja Global Solutions Ltd. and Ashok Leyland Ltd.

1. Should promoters of public companies be allowed to use these companies as their private wallet?
2. How will you protect the minority shareholders from this abuse of power?
3. How many boards are mere instruments of the promoter’s desires?
4. There is a scam brewing among promoters that is likely to be bigger than Satyam and Fortis.
5. This type of scam is brewing from the promoter shareholder, A.P.Hinduja of Hinduja Global Solutions Ltd. and Ashok Leyland Ltd. who abusing his power over the board is using these companies to fill the coffers of his privately owned businesses. By controlling several public companies, the promoter is playing a merry go round with money that belongs in the business or is entitlement of all the shareholders.
6. Despite numerous news articles published in The Economic Times (13.08.2020), Money Control (13.08.2020), The Morning Context (27.08.2020), etc. having already raised these concerns there is no visible action to hold the boards of Hinduja Global and Ashok Leyland and the promoter, A. P. Hinduja accountable. The press seems to also be pressured to stop reporting on alleged improprieties of the promoter AP Hinduja.
7. With the promoter abusing the rules for removing and seating independent directors, there has been a  total disregard for minority shareholders’ interests by the directors of Hinduja Global Solutions and Ashok Leyland and a clear demonstration that they act only for the interest of the promoter, A.P. Hinduja;
8. SEBI keeps its examination and investigations on  a complaint has stated it to be ‘confidential’ and thus the general public is in dark of deterrent action, if any.
9. The specific wrongful action taken by these companies is to lend company funds to a private company with no known business and no insight to its operations and without any security. These loans are approved by their boards who are instructed by the promoter. This abuse of power is wrong. Who will protect the small shareholders.
   
   1. Without embarrassment, the CFO of Hinduja Global ostensibly justifies to investors that giving loans to the promoter companies is based on sound treasury investment principals, which factually is incorrect.
   2. At an Earnings call and presentation on November 10, 2020 at Hinduja Global Solutions Ltd. (HGS), the company disclosed a loan of Rs.492 Crores by HGS which has increased from Rs.340 Crores to privately held promoter owned companies. in spite of shareholders/investor concerns and allegations of self-dealing and insider trading which were disregarded.
   3. These loans have been made from borrowed funds and the promoter companies use it presumably for activities such as insider trading duping the regulator and gullible small investor instead of the Board using these funds for reducing liability or Company purposes.  
   4. Similarly, Ashok Leyland also lent Rs 500 Crores to privately held promoter owned companies and shareholders/investor concerns were shrugged off.
   5. Each time irregularity of loan and interest repayment is being regularized by advancing further monies.
   6. The directors of the lending company are either employees of the borrowing companies or are nominees of Promoter.   
   7. The device of ‘rotational movement of funds’ is to mislead the Regulatory Agencies and deprive the shareholders of their dues and if such practices are not curbed forthwith, this may lead to another scan earlier unearthed by SEBI in companies like Satyam and Fortis.
10. This was followed by further reduced corporate governance practices at subsequent investor and shareholder meets. Concerns and questions about independence of directors given their conflicts of interest were also hushed up.
11. The promoter is a high risk borrower in light of high profile and ongoing family feud in multiple courts internationally, and being subject to several regulatory investigations as reported in the media.  
12. Promoter owned borrowing companies, as revealed in public records, do not have the cash flows to meet their repayment and interest obligations as per their balance sheets. Further ICDS are advanced for repayment of amounts due and interest payments to service the loans because they would otherwise be in default.
13. This device of ‘rotational movement of funds’ is to mislead the Regulatory Agencies and is designed to deprive the minority shareholders of their interests buried in financial engineering plans while stock prices are manipulated. If such practices are not curbed forthwith, this will spread to others who will believe that they too can get away with abusing investor interests, destroying confidence in the Indian markets and eventually lead to many more scams earlier unearthed by SEBI in companies like Satyam and Fortis.
14. All the checks and balances have now failed including those by internationally recognized auditors such as Deloitte and PWC as in past scandals where big money of powerful promoters are able to abuse the system believing they are above the law.