When it comes to financial reporting, as in any other economy, India has its share of “clean” firms as well as ones that are not so. In this paper, Evalueserve highlights potentially systemic issues, comparing transparence levels in India versus the United States. Included in this analysis are large Indian subsidiaries of international firms listed on Indian bourses as well as companies that have formed joint ventures with Indian counterparts.
There is evidence that smart investors are already quite concerned. In a recent news article, a renowned Indian investor and billionaire, Ajay Piramal, claimed that when he looked to make some investments in engineering and infrastructure companies, he could not make sense of their books. “We couldn’t find anything,” he said. “People get greedy. In their desire to get good valuations they resort to, if I can say, creative accounting.”
In a more concrete and worrying sign, in 2008, foreigners poured roughly twice as much direct investment into India – USD 33 billion as Indians plowed into businesses overseas. By 2010, that had reversed: Indians invested USD 40 billion abroad – twice as much as foreigners invested in India – a trend that continued in 2011.
In addition to the white paper, be sure to download Annex A, containing additional exhibits with data supporting the information in the paper.
Click here to download Annex A to the white paper.