Seems they got notification on Jan 3rd and didn’t disclose to exchanges
This is a wrong notion that the company has to disclose all notices/summons to the exchanges more so when there is no substance in the summon itself. Disclosures are done based on materiality of the same. It is the investors’ problem if they react to every news with the same viciousness.
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To begin with, I have no investments in Edelweiss and I have no view on the merits / demerits of the case.
I want to comment on the the extremely defamatory and tabloid-ish nature of reporting that indicates why we should be very wary of much of present day ‘journalism’, and the importance of separating emotions from facts.
First the video:
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The clip says, “Rasesh Shah’s Rs 2,000 cr scam busted”. Which means this is Rasesh’ scam, he was running this scam and this was busted. The 2:25 minute provides not even remote evidence that he was running this scam.
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The anchor says “he has been summoned in connected with the 2,000 cr Rs FX scam. Now this is a big forex smuggling racket that has been busted by the ED. Rasesh Shah’s benami companies are under the scanner. He has been under probe by the IT Dept, the IB and now the ED has been roped in, and they are now probing Rasesh Shah”. A version of the above statement is repeated.
An analyst would enquire, (a) Why is this a scam, what is its nature? (b) why is she introducing the word “smuggling”? What has been smuggled (which generally means goods / services moving in and out without payment of duties amd taxes)? (c ) He has been under probe by IT / IB, for what? What is meant by a probe? Almost every person with his income will get a IT notice asking for some information, will that be construed as a probe?
- The she goes on, “There are questions about…this is…this is going to be a much bigger scam once details are unearthed by the ED”
First, we don’t know why this is a scam, a smuggling; but this is topped with “going to be a much bigger scam”, with no basis as to why this will be a much bigger scam? A feverish pitch or narration is introduced to make it sound sensational.
- She then hands over to one Ms Chaiti Narula to “breakdown the allegations the Edelweiss CEO faces currently”. Chaitai Narula says, “At the outset, I would like to say that he is already been summoned by the ED. This is a 2000 cr Rs forex scam. People are saying this could go all the way up to Rs 10,000 cr. There are strong murmurs in the market that the market cap of Edelweiss could drop further, and this could for (sic) all likelihood be way bigger than we think it is, and it could be the next IL&FS of India. So the top boss’ fate at Edelweiss, Mr Rasesh Shah is uncertain at the moment. After the IT probe and the IB probe the ED probe has begun. This is big forex smuggling racket that has been busted by the ED”
So another reporter is called in to repeat what the anchor says (no ‘breaking down of the allegation’ and no new facts added), and to magnify it to say this could be the next IL&FS of India. Basis yet to be provided, but sensationalism repeated many times (IL&FS has a book of ~ Rs 100,000 cr at risk against a Rs 2000 crore fx ‘scam’ claims).
- Then, “in fact he has got several benami properties, and 2 of his directors of his shell and benami companies have written to the PMO and exposed Rashesh Shah”
He has got several benami properties? What does that even mean - I can understand layman bantering and tossing benami here and there, but we expect more of a reporter of this premier channel? And why does the reporter say they are benami? Does she have proof beyond reasonable doubt that it is benami?
Then she says 2 of his directors of his shell and benami companies have written. At this point it starts to get hilarious to ana analyst. What does she mean by his directors? How can anyone be owning DIrectors?! And then his shell and benami companies?!. But did she not say properties earlier? And again why are those companies shell and benami? Again her motive seems to be to reinforce sensationalism with having either all access to facts or the good sense of any self esteemed reporter to sift rumors from news.
- Carrying on, “it now remains to be seen how big this scam could go, this is a serious crime the ED is probing of the FX smuggling racket,…, and the fate does not look eh eh very well for the managi…CEO”
Again, why could a scam grow only big, why not small! What is the basis of the Rs 2,000 cr going potentially up to Rs 10,000 crore as per the anchor?
- Back to the anchor who promises to bring in more as it happens
So sensationalism scores 100%, emotions of fear, nervous excitement, a strong desire to spread the “news” around are aroused. Facts and basis score 0%, and the ability to think rationally now further obscured by emotions.
Next, coming to the report that shows a copy of the ED summons, the copy shows nothing other than that he is summoned in connection with FEMA for a named firm plus others. But what’s the base rate of summons? We don’t know how many other firms get summons and why? Besides what’s a summons? Just that he is called to answer some questions. That does not mean he / named firms / Edelweiss is engaged in a scam / smuggling racket etc?
The summons does not even say a prima facie violation of FEMA of the named firm 
In any case to repeat, I have no investments or vewis on Edelweiss, and I am just totally taken aback by the sway of sentiments when facts are completely lacking; thus serving as a good test to see if we can control our emotions.
Of course Edelweiss may be guilty of many crimes, and may be found to be ‘another IL&FS’, but there are zero facts based on this report.
P.S: I think many of the chips will fall in place if instead of “A copy of the ED summon dated January 3 has been accessed by India Today TV.”, it said “A copy of the ED summon dated January 3 has been provided to India Today TV.” I say this because if this was really accessed, there would also have access to facts, but if it has been provided, you have to make do with what you get .
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I am convinced that the manner of reporting is exaggerated but please consider this.
ET NOW also reports that issuance of the summon was denied by Edelweiss group. Do not know wether to trust ET NOW or not. And then clarification of issuance of summon coming from the company. In matters such as these the chairman and ceo should himself come out and clarify the issue instead of informing the exchanges via company secretary.
Not feeling comfortable as a long term investor.
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Breaking: ED summons Edelweiss Group chairman Rashesh Shah in Rs 2,000 crore forex scam
Edelweiss has sent a letter to BSE that they have mo dealings with the company in question. Capstone Forex Limited.
Looks like it will be an opportunity to buy if there is any adverse reaction in markets.
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This is more informative article with no rhetoric. First of all these officers demand presence of chairman is just an attention seeking exercise. It could be the case that some employees would be involved in some creative transactions. He had sought an extension due to personal engagement.
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Person of interest ( Sanjay Nathal Shah ) is an independent director of edelweissfinvest ( https://edelweissfinvest.edelweissfin.com/about-us#parentVerticalTab4 ) and hence edelweiss should have informed the exchanges as soon as it recieved the communication from ED , especially after all the NBFC issues of 2019.
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That is what the inference could be but that ED notice doesn’t mention anything of that sort. It is grey area to disclose notices issued to independent directors that too in the step down subsidiaries. Funny thing is that this is not a new investigation. During Bharat bond etf launch they had disclosed regarding ongoing ED investigation which was also duly acknowledged by the finance ministry. This appears to be creating another DHFL out of nowhere. It doesn’t help when they have some part of business which is struggling.
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There is “no smoke without fire”… Many instances in the past, such initial stock reaction always feels excessive. But when we look back after after 6 months or 1 year, this so called over reaction looks immensely justified. Hope that is not the case here.
I am not saying Edeleweiss can be measured on lines of DHFL, ILF&S, Yes Bank and the likes. But all financial entities (banks, NBFCs, SFBs etc) are prone to financial irregularities/frauds since money is the “raw material” of their business. In current environment, it is better to be safe than sorry, IMHO.
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Another ED investigation was there on Edelweiss just a few months back related to Kohinoor real estate group.
Stock tanked 13% on 1 day despite clarification.
Later it was found that Edelweiss had no wrong doing
ED has asked for some information and understanding of the process and the same has been briefed to them by us( ARC)."
Even in this case, the key culprit seems to be capstone Forex. And edelweiss seems to be one of the cos summoned for questioning.
Edelweiss has denied any transactions with capstone Forex.
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Capstone Forex allegedly created bogus tourist lists and illegally remitted foreign exchange overseas, according to officials. “In order to provide credit balance to this company, Edelweiss Group companies and another firm under probe allegedly issued cheques to this Thane-based company for buying dollars and transferring under current account. These dollars were remitted to shell companies, which subsequently withdrew the money mostly through cash,” said a second official.
There has been fraud at two levels – one, foreign exchange was illegally remitted by creating a bogus list of travellers and, second, a corporate like Edelweiss Group helped in illegal procurement of foreign exchange,” said the official. “While the major player in this looks to be the Edelweiss Group, the other entities which also helped provide credit balance to the Thane-based firm will be called in due course.”
The role of each party in the transaction is being ascertained, as are co …
Read more at:
EDELWEISS few yrs back in another issue… https://www.epw.in/journal/2017/25-26/web-exclusives/when-nation-could-not-feel-pulse.html
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Had stumbled upon this article too when I was trying to understand the structuring of subsidiaries and their lines of business. The following is the relevant part pertaining to Edelweiss which seemed damning.
Given prior odds of finding a good leveraged lending business, the likelihood of the same reduces dramatically when things like these surface. We must update our beliefs continuously.
Disc: No interest. Had looked at it in the past and found it (the structuring of 100 odd subsidiaries) too difficult to understand and gave up
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Any idea when is edelweoss planning to declare q3 results?? Anything to worry even more??
Results are coming on 14th February.
To best of my knowledge, Rashesh Shah has not faced the press / investors since the ED news.
2 key parameters to watch in this Quarterly results will be NPA numbers ( probable negative) and numbers from ARC business ( probable positive). Along with it, tone of management commentary
will decide the movement of this beaten down stock in coming days/months.
At end of Q2 their Corporate book size was 16178cr , in Q3 corporate credit book size is 13927cr.
5100cr borrowing has been repaid in this quarter , D/E is 2.9 now.
Credit costs 205cr for this quarter, I think totally now 660cr done for this FY. Another 90-140cr left as per management guidance