There are strict regulations about forward looking statements from companies which are in the process of tapping the capital markets. This is even more the case where it involves financial numbers like revenues and profits as it is viewed as inducement to subscribe. It is a completely different matter that a lot of data is available in the form of whispers and hush hush conversation which comes out publicly but cannot be attributed to a source.
Larsen & Toubro Infotech Limited is in the process of its offer for sale of 1.75 cr shares in a price band of Rs 705-710. The issue has opened on Monday and closes on Wednesday the13th of July. The issue has already been oversubscribed and the last day rush as witnessed in almost all issues is yet to happen.
The Non-Executive Chairman of the company is the well-known Mr A.M.Naik who has been associated with the parent company for over fifty years. He has handled number of issues and is more than a veteran in every sense of the word. He in an interview which appeared in the Economic Times dated 11 th of July 2016 said,”L&T Infotech will double in three years with a mix of organic and inorganic growth. We think we will be able to grow to $1.5 billion organically and about $400 million will come through various acquisitions. This is on record in an interview and not what was quoted, misquoted in a public forum.
There is a background to this interview where analysts and investors have been questioning the poor growth in revenues from the company. Rupee denominated growth in the period 14-16 has been 13.5% while in dollar terms has been 9%. This has been lower than other comparable peers and probably to take the bull by its horns, this aggression has been used to convince people that growth issues are a thing of the past.
Couple of questions come to mind such as is this forward looking? Is the management allowed to make such statements during the process of the IPO? Will the regulator look into the same? Will the fact that this is a statement from a very highly respected professional, hence no action? Will the law and regulation only apply to smaller companies and individuals who have no voice and will be penalised.
One remembers the high profile case in the US of Rajat Gupta who was successfully convicted and had to serve his term. The fact that he was the Managing Director of consultancy firm Mckinsey and Company made no difference.
For the development of capital markets and compliance it is imperative that the regulator indiscipline and equality. All must be treated fairly and justly and the action be common irrespective of who did it or said it. One would expect the present regulator to do the same in this case which if not dealt with would become a precedent.
One hopes that justice is done and done quickly as justice delayed is justice denied. An example must be set where the regulator tackles bravado head on and does not allow to be cowed down.
