Forensics and the art of triangulation


(shreys) #163

Regarding ICICI’s loan to Kingfisher I don’t know enough to comment. But, I consider it imprudent to pass sweeping remarks on someone’s morals just on hearsay.
And regarding the Padma Bhushan award it’s sole requirement is exemplary contribution to any field.
In my humble opinion, she has played an instrumental role in strengthening India’s banking system. Her role in growth of ICICI Bank was noteworthy. I think Mrs. Kochhar deserves credit for transforming ICICI to ICICI Bank- the banking behemoth.


(phreak) #164

(Krishnaraj) #165

Felt like a gossip column. Sometimes I suspect there is enormous pleasure to be derived from moral pontification, especially where popular opinion all seem to point fingers at someone well-known, and does not involve one self.

There is no analysis, no insight, but a restatement of known facts and general lament that morals have gone down and ‘those were the days’.

Wanted to add that Mr N Vaghul has come to the defence of Ms Kochhar, by saying ‘…he sees no clear economic advantage accruing to Mr Kochchar from the transaction’. Mr Basu was showing Ms Kochchar as guilty and Mr Vaghul as an angel, in his article. Now with Mr Vaghul in support of Ms Kochchar, wonder where that leaves his views

But it does show the immense pressure on ICICI to come clean.


(Batterinram) #166

http://www.business-standard.com/article/companies/avista-helped-icici-bank-clients-to-recast-loans-for-a-commission-reports-118040300389_1.html

More questionable dealings coming out in the open. The CEO’s brother in law runs a company (Avista) that has helped ICICI clients to recast their loans for a commission. Glassdoor employees review of Avista has some unflattering remarks about its owner as well.


(HG) #167

(shreys) #168

It’s intriguing that even 2 decades back ICICI, then led by Mr. Vaghul- who is exalted for his morals, had significant exposure to Videocon which was struggling even 2 decades back.
Credit - Sucheta Dalal


(donbox5) #169

(Krishnaraj) #170

Thanks for sharing, seemed like ICICI was putting good money behind bad to bail out Videocon. The article also says, ‘ICICI’s note on the market and competition for Videocon’s products reads like a public relations handout from the company’.

I can also now understand why Mr Vaghul has joined the debate :slight_smile:


(shreys) #171

Completely agree. It piques my curiosity that despite such bitter experiences in the past banks continue to have significant exposure to such companies.
I think one major reason could be the sunk cost fallacy.
Most humans have the desire to close their mental accounts at a profit, to enhance their self image. Despite their best intentions the baggage of the sunk cost prevents them from acting as rational agents. Hence, often when a project of a company has failed after a significant investment it may be an idea worth considering to replace the chief and install a person who had no association to the failed project. New leadership won’t necessarily assure good performance but at the very least, tendency to spend good money after bad will be curbed.


(Value Seeker) #172

It is too easy an explanation to say sunk cost. There seems to have been a quid pro quo in this case. So inverting - it could have been a “me too” bias i.e. i want my 2% as well :wink:


(shreys) #173

I was referring to the Videocon lending in 1998 when ICICI was led by Mr. Vaghul.


(Value Seeker) #174

Understand - but IMHO the quid pro quo seems to have persisted…


(Krishnaraj) #175

Another illustrative piece that shows that the relationship between Ms Kochchar’s family and the defaulter Videocon goes back until the mid 90s.

https://www.moneylife.in/article/kochharsrsquo-business-links-with-videocon-dates-back-to-early-1990s-at-least/53692.html


(Krishnaraj) #176

Piramal Estates Pvt Ltd, a company owned by the Piramals and with related party transactions with PEL buys off a Minister’s firm making only 34 lakhs of profit for 48 crores, and soon writes it down by 80%! Losses are borne by shareholders and tax payers!

Correcting this piece - the company in question is not a subsidiary of PEL as mentioned earlier.


(Shiv Kumar) #177

the ‘loss’ should be considered as cost of doing business in India. in other words unorganized or grey market ‘business’ is going ‘legit’. otherwise why would ajay piramal be so generous as to overpay for a business owned by a politician?


(Marathondreams) #178

Response from Piramal’s


(Krishnaraj) #179

Thank you!

I read the piece.

It says, " “The Piramal Group strongly refutes the false allegations made
by The Wire in their factually inaccurate and libelous story dated April
28,” .

So what is “inaccurate facts” as per the Piramal Group?

To find out, let’s look at Piramal Group’s full statement produced by The
Wire here - Piramal Group official response
https://thewire.in/political-economy/piramal-group-responds-to-the-wires-story-on-piyush-goyal.
If you look at the response, it does not say what is inaccurate. Piramal
Group narrates their version of the events. This version is not any
different in facts from what The Wire published. It has a statement, “The
purchase consideration paid was the fair value of the underlying
investments (movable and immovable assets) and the same was paid in July,
2014 itself.
”. This does not say when the shares were transferred. The
date of transfer of shares is the transfer of ownership. The date of
transfer of ownership, claimed without refutation, as per ROC, and as
published in The Wire, is Sept 29, 2014. In fact this was asked to Mr
Piramal before publication, which was unanswered.

Further Piramal Group says this was valued by an independent CA. In
effect, this means please don’t ask us, go ask the ‘independent’ CA who
arrived at the fair value. The Wire says this does not look fair, that
something that was valued at book at around Rs 200,000 has a fair value of
1000 plus times, in a few months. And then, “only to end up declaring
the net worth of the company by March 2015 to be less than a quarter of
that valuation.

Nett, The Wire is making a fair ask and Piramal Group has not said clearly
what is factually inaccurate. Recall the book Spy the Lie, where the CIA
authors say that if the answer to your question is not direct, then chances
are high there is something hidden from you. I think the answer from
Piramal is not direct.

Maybe the quote from Warren Buffett that you should be able to answer an
unfriendly but intelligent reporter as a test of your reputation, is
relevant here.


(Krishnaraj) #180

After @rahulbdhandho’s correction that Piramel Estates Pvt Ltd (PEPL) is not a subsidiary of Piramal Enterprises Ltd (PEL), I did some digging into the RoC filings.

Although not a subsidiary, there have been related party transactions between PEL and PEPL, mainly as rent provided and some advances as follows:

image

Further I made some interesting notes on PEPL based on the RoC filed reports (out of sheer curiosity) during the year of the transaction:

  1. Piramal Estates Pvt Ltd was a company whose net worth was in the negative substantially;
    ₹ - 472 cr and ₹ - 353 cr in FY 15 and FY 14 respectively. However the auditor made no mention of why this should be continued to be treated as a going concern.

  2. It had substantial secured and unsecured borrowings (not from banks, but from ‘others’ - related parties, no names disclosed) in FY 15. It was also not paying interest due on its unsecured loans, even then it continued to get unsecured loans (~ Rs 2,140 cr at end of FY15) as can be seen below snippet of the report.

image

  1. The loans were subtantially used to make short term loans and advances, and investments (bulk of investments was into Piramal Realty Pvt Ltd and Guilders Buildcon LLP). However it did not accrue any income from such large advances. Its income was only from rentals and from its invetsments.

  2. These secured and unsecured loans were from related parties, but the names are not disclosed. The above nature of the transactions indicate that they were not at arm’s length, but the financial report says these were at arm’s length.

  3. The P&L was loaded with interest expense against borrowings thus incurring losses of 81 crores and 120 crores in FY 14 and FY 15 respectively.

  4. Income Tax has made a demand of Rs 23 crores which indicates that as per Income Tax, there is an under-recognition of Income of about Rs 65 - 70 crores.

A summarised verion of Balance Sheet and P&L of PEPL is shown in Table 2 below

image

Nett it seems to me that PEPL was a conduit to make investments and provide loans that do not seem to be at arm’s length, to various parties.

Given that PEPL is not a charitable entity, so how does it recover what it has charitably given?


(Gaurav Agarwal) #181

An article about Radha Soami Satsang Beas and Fortis Healthcare


(Krishnaraj) #182

The Ken has an excellent report on Cafe Coffee Day today.

(Note: subscription needed)

But some snaps from twitter are here:

image

It’s never too late to learn a new way to pony up sales, but I thought this one was gruesome:

“A higher manager would come and bill the merchandise on the manager’s name and she would be given three months to sell the merchandise on credit. “Nothing will happen after three months. People will pay from their pockets,” Reddy shares.”

In other words, employee salaries go towards sales and not to employees!

Cheers,