The tricks that promoters play at the expense of shareholders

In the wake of the Satyam-Maytas debacle, we highlight the three most common tricks that Indian promoters employ to enrich themselves at the expense of shareholders. In the currently depressed market conditions, the divergence between promoters’ goals (around boosting personal wealth) and shareholders’ objectives (around growing the value of the firm) has become sharper.Moreover, contrary to conventional wisdom, such shenanigans are not confined to small cap stocks; some of the largest companies in India have a penchant for such tricks. These tricks create the need for investors to use unconventional means,such as primary data and forensic accounting, to assess promoters’ probity.

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