X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Shortcut to Dalal Street
Mon, 30 Apr Pre-Open

Listing a company on the bourses is a cumbersome process. Host of guidelines/regulations, past track record and unfavourable primary market conditions can act as a hindrance. However, promoters of many unlisted companies have found a way out to get themselves listed by evading the current clumsy process. And that is by acquiring listed shell companies. For the uninitiated, a shell company is an organisation which does not have any business or assets in place. Acquiring such companies gives a ready platform to promoters of the unlisted entity, to subsequently merge their business with the shell company. This gives them a backdoor entry to Dalal Street.

Reverse merger transactions (merging the listed company with the unlisted one) are especially favourable during weak market conditions. This is because during such times listed shell companies generally trade at a discount. And thus, the promoter of the unlisted entity does not have to pay a huge premium to the current market price. In fact, there have been a quite a few shell acquisitions in the recent past due to weak market conditions.

But one must remember that such acquisitions can also backfire as shell companies are fraught with accounting irregularities and weak corporate governance practices. Take the case of US shell companies for example. Off late, many Chinese companies had gotten themselves listed in the US through reverse merger transactions. However, as accounting scandals in these shell companies started coming on to the fore (resulting from intense scrutiny), many traders indulged in short selling in order to make a quick buck. This not only resulted in huge price erosion but few of them also got delisted in the said process.

Another issue with shell companies is that since they having no business of their own, the intrinsic value and the acquisition premium paid, is always under question. There is no way an unlisted promoter can come to a fair value of a non-existent business. Also, the acquisition premium he is willing to pay is dependent on his willingness/need to get himself listed. Thus, we believe that gaining a backdoor entry through shell acquisition is a dangerous way to go public. If the business has strong fundamentals, the traditional Initial Public Offer (IPO) route is much safer.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "Shortcut to Dalal Street". Click here!

  

Stock Market Updates

The BSE IT Index has hit an all-time high at 14,733 (up 2.1%) (Today's Market)

Jul 16, 2018 10:19 AM

The BSE IT Index has hit an all-time high at 14,733 (up 2.1%). Among the top gainers in the BSE IT Index today are INFOSYS LTD and L&T TECHONOLOGY SERVICES . Meanwhile, the BSE Sensex has surged 0.05% to 36,659.

GODREJ CONSUMER at All Time High; BSE FMCG Index Up 0.4% (Today's Market)

Jul 16, 2018 10:19 AM

GODREJ CONSUMER share price has hit an all time high at Rs 1,350 (up 2.40%). The BSE FMCG Index is up by 0.43%. Among the top gainers in the BSE FMCG Index today are GODREJ CONSUMER (up 2.40%) and NESTLE (up 0.44%). The top losers include COLGATE (down 0.00%) and HATSUN AGRO PROD. (down 0.03%).

INFOSYS LTD at All Time High; BSE IT Index Up 2.3% (Today's Market)

Jul 16, 2018 10:17 AM

INFOSYS LTD share price has hit an all time high at Rs 1,383 (up 5.49%). The BSE IT Index is up by 2.32%. Among the top gainers in the BSE IT Index today are INFOSYS LTD (up 5.49%) and TCS (up 0.39%). The top losers include PERSISTENT SYSTEMS (down 0.09%) and 8K MILES SOFT (down 0.22%).

RELIANCE COMMUNICATIONS plunges by 5%; BSE 500 Index Down 0.4% (Today's Market)

Jul 16, 2018 10:14 AM

RELIANCE COMMUNICATIONS share price has plunged by 5% and its Current Market Price is Rs 13. The BSE 500 is down by 0.35%. The top gainers in the BSE 500 Index are INFOSYS LTD (up 5.03%) and GODREJ CONSUMER (up 1.83%). The top losers are RELIANCE COMMUNICATIONS (down 5.38%) and DR. REDDYS LAB (down 8.75%).

Of Fall in SmallCap Stocks, Infosys Announcing Bonus Issue and Surge in Retail Inflation (Today's Market)

Jul 16, 2018 Pre-Open

The key developments to watch out for in today's trade.

View More Indian Share Market News

Most Popular

Has A Bank Ever Told You Its Deposits are Riskier than Stocks? These Should Have...(The 5 Minute Wrapup)

Jul 3, 2018

Left on their own, the banks would possibly have to mark down the value of deposits by 90% to 100%.

The Real Truth About India's FDI, Beyond WhatsApp(Vivek Kaul's Diary)

Jul 4, 2018

The FDI numbers do not look very impressive once we adjust for repatriations as well as the overall growth in the economy.

The Answer to Your Wealth Worries: Small Caps (Especially Now)(Profit Hunter)

Jul 10, 2018

If you're worried about the markets - you are on the wrong track. This is opportunity - put your wealth-building hat on, instead - Richa shows you how...

New Fund Offer - ICICI Prudential Pharma Healthcare and Diagnostics Fund - Should You Invest?(Outside View)

Jul 6, 2018

ICICI AMC launches an open -ended equity fund following Pharma, Healthcare, Diagnostic and allied theme.

When Disappointment Panda is Around. Buy Quality Stock like This!(Chart Of The Day)

Jul 6, 2018

Buy Companies that can fight all kinds of Pandas and Bears in the long run.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Jul 16, 2018 12:21 PM

MARKET STATS