Corporate Fraud/Misdemeanor - Public Domain - India lessons

Some companies where things went wrong, sometimes horribly wrong:

1). OnMobile

2). IRB Infra

3). Educomp

4). Deccan Chronicle

5). Tanla Solutions

6). Teledata

7). Prithvi Info Systems

8). Riddhi Siddhi Gluco Biols

9). K S Oils

10). Anand Raj Industries

This is an initial list only. Feel free to expand the List, but make sure that these are all public-domain frauds/msdemeanors. Let’s start with making sure all 10 above in the list are in public domain. If not, replace with one that is, asap.

Akbar and Dhwanil -** will be great if you can take the Lead role** in guiding the discussion flow here. We want to capture the broad specifics of the fraud/midemeanor in 1, 2 or 3 paras at most. We MUST link to original sources where the fraud/midemeanor has been reported/dissected/or a judgement delivered. Those who want to understand the specific case in complete detail can refer to these sources.

Our intent is to outline the broad specifics and capture “patterns”.

If you blog on your own, you are at full liberty to publish/re-publish or delve into greater detail anywhere else. ValuePickr retains the right to also use the material being collated here for further analysis/dissection/learning and publishing purposes.


Educomp … in 2009 many raised concerns on its accounting method

in early 2010 two IPO came both of which were making continuously high giving almost 300/400% returns in few months. Both were getting reported daily in top 2 positions on list of top IPOs. But now one of this trade around 8 times IPO price and other has fallen more than 50% from IPO price :slight_smile: and that two stocks are Jubliant Foodwork and ARSS infra

One of the biggest failure in capital good space which made severalinvestors(including BIG BULL) never loose hope even after reporting losses for several consecutive quarters … if u see thread of this cos in TED, title say its “L&T in making” … people still have confidence in this cos … Many might have already guessed this “Punj Llyod”

Disclosure: No Fraud has been identified in companies like Punj Llyod, Sun TV and all above mentioned scrips by me in this thread.

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Thanks for immediate energetic responses:)

In this thread the focus is to concentrate on the FRAUDS. Those have been proven to be FRAUDS or atleast MIsdemeanors.Amisdemeanor(also spelledmisdemeanour) is any "lesser"criminalact in some common law legal systems. Misdemeanors are generallypunishedless severely thanfelonies, but theoretically more so than administrativeinfractions(also known as minor, petty orsummary offences) andregulatory offences.

Stock hammering may also be due to corporate misadventures and/or industry issues/political or regulatory, without any frauds/misdemeanors intent. This thread is not about stock falls -generally per se - it is about FRAUDS. There’s a specific thread dedicated to Corporate misadventures.

Please see this Corporate Fraud - Global lessons thread, where I have started to highlight some public-domain established fraud cases globally, clearly establishing the specifics of the fraud and and the links to articles in public domain.

Please keep contributing, BUT with that filter of public domain, no “hearsay” stuff on ValuePickr. There are sensitivities involved, and we do not need to sit in judgement anyway - just want to learn what we can learn from how frauds are perpetrated.

Requesting Admin to shift corporate misadventures to separate thread and remove/edit out references a) that are clearly NOT frauds and b) references that arenot documented in public domainas frauds.

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A Wonderful Thread…Thank you Donald,

One company to indulge on is SATYAM COMPUTERS LTD, It would be a good lesson going back and raising red flags from previous posted AR’s.

SKS Microfinance:

i think it was biggest IPO in 2010 giving eye-popping 60% (Rs.900 -> Rs.1500) return immediately … Retailers even got discount on IPO price … Narayan Murthy was invested in this cos at much much lower price(Rs.300) than IPO price(around Rs.900) just one year before listing … even Vinod Khosla(Java fame Sun Microsystems’s founder) was invested(pre-IPO)in this cos … it was considered as future bluechip stock in Indian market

But now within two years it made low of 54 :slight_smile: thus crashing from 1500 to 54

Lot of articles fired against SKS by moneylife during those days. One such article is


Some cases where I personally suffered as the stocks from my portfolio tanked.

Nov 2010: LIC Housing Finance (CEO arrested on bribery charges)

Oct 2010: Welspun Corp (IT Raids in 4 sites) - Once tainted with corporate governance scam the stock could never get the same investor confidence it enjoyed earlier and crashed subsequently. The poor earnings only added to the fuel.

August 2011: Everonn Education (CBI arrests Everonn Education MD P Kishore on charges of bribing I-T official) - the stock later got investments from SKIL but investors suffered hugely.

**July 2012: Deccan Chronicle **)- Huge debt pileup from unworthy businesses like retail book shop, IPL team, avaition business ruined one of the iconic paper brands from the south. The stock crashed from the highs of 280+ to 11.


Lets start tackling companies listed by Donald…

I start with Tanla Solutions as I had myself invested in this after it had crashed but got out with some losses before it continued its crash journey.

The stock price journey was spectacular after IPO it went to 465 and now in single digits… all the time there were buy recommendations on the stock.

From a BS report…

Tanla Solutions

For this mobile value added service (MVAS) player, which gets over three quarters of its revenues from UK and Ireland, the recession in these markets have dampened the business outlook in the near term.

The company offers telecom infrastructure solutions through its four segments—products, network aggregation (SMS, MMS), professional services (infrastructure management) and mobile payments (smart phones) in about 28 markets around the world. Though the UK market is growing at just 10 per cent, VAS contributes to nearly a fifth of total mobile usage. With a shift to higher usage of 3G and mobile internet on the rise, Tanla with a 5 per cent market share in the UK market should benefit. For Q3FY09, except for the mobile payments segments, all others reported a decline of over 20 per cent q-o-q (sequential) due to a combination of slowing growth, regulatory changes in UK and weakening of the British pound.

The company is expanding into the Indian market and has deployed the 3G platform for MTNL and launched the missed call alert for Aircel among other projects. While Tanla is debt free and sitting on a cash of about Rs 150 crore, its debtors at Rs 278 crore and an increase in debtor days to 119 days in Q3 are causes for concern. The management, however, believes that this will come down going ahead and Ebidta margins, which have dropped (768 bps q-o-q) to 38 per cent, should stabilise on higher transaction volumes and cost cutting efforts. The stock which has corrected substantially over the year and on the back of robust growth prospects should fetch returns of about 40 per cent over the next one year

This was attractive because the company had shown very high growth in the past.

Was operating on the technological edge

Was debt free.

Employed IIt, IIM guys

Had top clients in UK mobile industry.

Could replicate the succes in UK to other markets as well as in India.

Some dose of reality…

Company was initially a dairy company… changed name to tanla Solutions

Acquired businesses in UK, Finland which possibly showed the huge growth until 2008-09

Low promoter holding

Had cash on Balance sheet, but it was raised in IPO and over time this was goin on reducing due to negative cash flows… this realisation was my reason for exit

Had rumoured links to pliticians in Andhra… once politicians out of favour… it became the end of the story.


Employee feedback (or curse actually)

Customer feedback (or complaints actually)

Links to politician

The story is also well covered on TED as it unravelled.


Hi All,

Looks like there are lots of ideas floating around! However, I propose that instead of just writing whatever we know, lets try to put this in a structured format. May be we can start with company’s background/financials, How fraud was uncovered, what led to the fraud (accounting gimmickery, money laundering by an individual etc), and finally what were the "red flags"which should not have been ignored. I think the last part is the most important one as it will add significant value to us asonce say 15-20different cases are enlisted with “red flags” , one would always be on look out for these “flags” before making investment decision.

Ideally, Ishould have created onecase out of the 10 companiesmentioned by Donald to make myself clearer but unfortunately, I amout of towntill next week. so I will definitely do so onceIam back.

Best Regards

Dhwanil Desai

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Hi Dhwanil,

I guessed you might have got busy; so we let this thread start running naturally. Lets get in more examples, and some of us can collate and present back findings in a structured form.

It will be good to have a structure that focuses on key extractables; Do send in your thoughts by working out one or two examples in a structured form. I am sure others will be able to take that forward.


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Hi Akbar,

Yes, I also got hit on Tanla and the issue is that it was really tough to make out from the nos if things are fictitious and inflated. The way they were growing, the profile of the management/promoters made me feel this company can do something big. Plus VAS was a sunrise area.

Infact they used to talk aboutsubstantialmarket share in Europe and relationships with biggies like Vodafone etc. So these things used to give credibility.

They also used to do all the investor relation things like - good annual report, timely concalls etc etc. Infact promoters have been buyers from open market for quite sometime despite the fall.

I got out from the stock when it recovered from the first crash and then when I noticed abnormal volumes in the stock, I exited. From the point of our exit, the stock again fell 90%+.

So this even brings us to one more angle - cos with smaller history are RISKY! and hence homework and ground work is important. Since then I have avoided IT cos and prefer to stick to cos with products which can be seen in the market.

Thanks for the details on Tanla.



Hi Ayush,

Thanks for your views on Tanla… can you delve further on the “abnormal volumes” that you mentioned?

What was the clue that you got?

Was it the FII exit form the stock?

Best regards,


Hi Akbar,

Usually the volumes were limited in this stock earlier. After the first crash to Rs 20 or so, the stock rebounded to i think 80 levels and then after few days volumes started to take place in lakhs of shares per day. Seeing such volumes on consistent basis, I just exited.

I think abnormal volumes are created to trap public or bigger players by offering trading opportunities etc.

Above is just a inference from experience.





Do read this forbes article on the fraud at Deccan Chargers -

Should be quite insightful and learning.



This is a nice one fromMoneylife on Warburg Pincus and it’s investment in Moser Baer

Good Learning.

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for most of the companies listed, a common thread has been

1). great p&L but very bad cash flows.

2). promoter raising money on a regular basis.

3). lots of loans and advances


Here is a nice update on the Subex story.

The company, where i lost 98% of my first investment :slight_smile:


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Here is one more fantastic investigative article on e-tailing and how it might be violating the FDI in retail law.

Smart money is not so smart after all ? remembering Subhikhsa, SKS Micro Finance and Flipkart etc…

One common observation in the list of the companies is that most of them belonged to the kind of business in which the businessenvironment changes suddenly ( moat of the company is not sustainable , the company at first looked a niche and emerging one but things changed very rapidly ). Such things are common with IT telecom and sofware based companies as in thecompetitive age moats gen last for few years only . So how bright the management be themediocre business catches up very soon .

Another part looks like the shady govt and political linked business which have over a period of time proved bad for the minority shareholder like irb infra , anant raj industries ,r com , unitech…list goes on