New Delhi: Non-disclosure of financial details in M&As, including companies like RIL, has come under fire by market experts who have sought rules for mandatory disclosures of deal value and other terms.

Mukesh Ambani-led Reliance Industries group on Friday announced its entry into the insurance business through buyout of Sunil Mittal-led Bharti group's majority stake in Bharti AXA Life Insurance and Bharti AXA General Insurance.

However, the companies did not disclose the deal value, even as it involved acquisition of a stake as high as 74 per cent in each of the two Bharti ventures.

In most of the merger and transaction transactions, the deal values are among the most important details and generally they are made public by the concerned companies.

However, at times, the companies tend to keep the deal values a secret, especially in the initial stages, and make them public only at a later stage or after the final closure of the deal.

Reliance and AXA said the "transaction is subject to negotiation and entering into legally binding agreements between RIL, RIIL (Reliance Industrial Infrastructure, which is a group company of RIL) and AXA."

Despite attempts by the media, the companies did not disclose the deal value and said it would be announced later. However, market experts have criticised the non-disclosure of
valuation and other financial terms of the deal, saying that it was against the investor interest.

"Making public the deal value is very important. Reliance and Bharti are the top companies of the country. So, they should have set the benchmark to make the transaction open," SMC Global Securities' Strategist and Research Head Jagannadham Thunuguntla said.

Recalling an earlier deal, he said that Hero Honda (in connection with the exit of the Japanese partner Honda from the venture) had also not made public the deal value and had to bear the investor brunt in the market.
 
Echoing similar sentiments, Geojit BNP Paribas Financial Services Assistant VP Gaurang Shah said: "Shareholders have every right to know about the bits and pieces of a deal."

He added, "Not disclosing the deal amount may be in the larger interest of the company, but shareholders should not be kept in the dark."

Shah went on to say that there should be some ordinance with regard to making public the deal value, kind of deal, among other factors.

Experts also said that non-disclosure of the deal value leads to unnecessary speculations about the size and other details of the transactions. Ashika Stock Broking Research Head Paras Bothra said, "Most of the time, it is on mutual understanding that companies do not disclose the amount."

He added, "(Details of) Any listed company acquiring any listed or unlisted entity should be disclosed properly and thoroughly. Shareholders are always willing to know what are the implications of the acquisition.

"From a shareholder point of view, everything and anything under the sun or any kind of M&A activity that is being done should be disclosed."

Bothra said such disclosures should be made mandatory, but finally it depends on the decision of the regulators and enforcement authorities.

(Agencies)