Key Role Of Promoter Driven Companies In India's Growth

The Indian growth story is marked by several factors and one of most crucial of them is the role of Promoter Driven Companies.

Seema Jhingan, Partner & Co- Founder, LexCounsel said that promoter driven companies have been the key contributor to the Indian growth and development in terms of economic development in the last decade and their counterparts, the MNCs have been failing those enclosures, but the PDCs have led from the front and done phenomenal work. There's a recent report which said that PDCs have 75 per cent of the stock exchange market capitalisations. So that's a phenomenal growth factor. Their profits, their share, valuations are far ahead of MNCs.

"Promoter driven businesses are so focused on the growth they want to do. They are so focused that they forget about the legal things which they need to take care of, to give the best to the to all of us so how is when we buy a house? It's a dream for us, right? So, there are a lot of compliances which you need to do there. There are in my environmental compliances there are fire compliances but what I've seen is the promoters they don't care about what what they need to do. They just construct the project and sell it as soon as possible," said Alankrit Bajpai, Legal Counsel, Whiteland Corporation.

When asked about what Promoter driven business need to know from moderator Tarun Nangia, Associate Editor, News X, Vaibhav Kakkar, Partner, Saraf & Partners said that a lot of times promoters would look at companies as their own family-owned enterprises and as their personal asset, and they would deal with those organisations as if it's their personal thing. So that needed to change, and mindset shift needed to happen.

He further said that, "if you are raising investor money, you do owe a fiduciary responsibility, how that investor money is spent. Even in the unlisted space where the so-called unicorns, when they raise a lot of capital and the promoters or the founders have not acted appropriately, they've had to pay a heavy price."

Pranav Chawla, Legal Counsel, OfBusiness said that the promoters have a mindset that they want to do compliances on a need to know basis in order to get away from the eyes of the regulator.

Kanika Sachdeva, Regional Legal Counsel, Stryker, emphasised that we need to appreciate the unique Indian concept wherein promoters hold a good chunk of shareholding and that is the reason they start over-involving themselves in the affairs of the company, which needs to be watched out.