Preferential allotment scam

A number of multi-national companies (MNCs) and also some Indian companies started consolidating their shareholding in 1993 by making preferential allotment of equity shares to their controlling groups at steep discount to market price. This resulted in large losses to the minority shareholders.

29 MNCs exercised the provisions of preferential allotment of shares in favour of their promoters at a meagre Rs 60 and T 110 against the market price of Rs 700 and f 1050 respectively. 9 Indian companies similarly allotted preferential shares to their promoters during 1993-94. The lowest price at which one company allotted the share was Rs 22 against the market price of Rs 400. Total unlawful gains made by the promoters by preferential allotment ran into more than 2996.56 crore for MNCs and Rs 846 crore for Indian companies.