Some corporate frauds seen in 2013

** New Delhi** July 10, 2013 Last Updated at 22:48 IST

The Mark Mobius pick that bombed

Shiv-Vani Oil’s share prices have plunged 93% since the Templeton investment in 2010

When _Mark Mobius_a Templeton Asset Management (TAML) announced an investment of $20.6 million in shares of _Shiv-Vani Oil_ and Gas Exploration Services on March 29, 2010, these were trading at Rs 412 each.

Soon after the deal, Mobius, executive chairman of TAML, said: aWe are impressed with Shiv-Vanias oil and gas exploration services capabilities and are confident these can be leveraged to assist oil & gas companies around the world.a The investment, he was confident, would fund the ongoing equipment and technology needs to make Shiv-Vani a force to reckon with in the global arena for exploration services. aThis investment fits well with our global exposure to the energy sector and we look forward to working with Shiv-Vanias management and promoters to make this a landmark relationship,a the star fund manager had said.

Strengthening this outlook, Rohan Consultancy Services, a promoter group entity, purchased 277,178 shares in May 2010 at Rs 423 a share.

As Mobius had said, Shiv-Vani was ideally positioned as the largest onshore rig owner-cum-operator to benefit from the Union governmentas expansion plans and increased spending in onshore exploration. It also had a healthy order book of around Rs 4,000 crore, in a sector where entry barriers are high. Most important, Shiv-Vani had a healthy business relationship with the governmentas Oil and Natural Gas Corporation (ONGC), the largest exploration entity. It certainly looked like a good investment.

Today, Shiv-Vani shares are trading around Rs 28 and show no sign of recovering. At this price, the entire company is valued at a paltry Rs 130 crore. At current exchange rates, this is marginally above $20.6 million, the amount Templeton paid for its 5.3 per cent stake three years earlier.

In it, along with Templeton, are other marquee names such as Citi Venture, Reliance Capital, Aviva Life and Religare Finvest. Is this 93 per cent crash in stock prices justified or are the prices running ahead of fundamentals?

Templeton, which has since raised its stake to eight per cent, did not respond to an email query on the investment. A Templeton India spokesperson said the fund did not comment on stock-specific queries.

What went wrong?
Fund managers with exposure to the company said Shiv-Vani has been facing trouble on multiple fronts over several months and has not done enough to fight these. While the business outlook became grim following lower government spending, several operational issues erupted as the company found it difficult to service high-cost debt. Investor circles also said the company had initially benefited from association with the brass in some public sector firms, whose contracts it was executing, and suffered when these ties snapped.

Rajan Gupta, chief financial officer, Shiv-Vani, told Business Standard: aRevenue is good in this business. But the financing we had taken was short-period financing. Being a capital-intensive industry and no way to raise equity, all our expansion was through debt. Despite the good profitability, most of the revenue was spent in servicing debt.a

Gupta dismissed the conspiracy theories but agrees things got difficult when ONGC, Shiv-Vanias primary client, was in the middle of a leadership change. aONGC was headless for about a year. Contract renewals did not take place during the period. This affected the cash flow.a These financial constraints made the company default on tax payments.

In January this year, the Central Board of Excise and Customs registered a case of service tax evasion of Rs 200 crore. Reports said the firm had not filed service tax returns since October 2010. The company agreed to the liability but cited afinancial constraintsa for non-payment.

What could be the financial constraints of a company that made revenue of Rs 1,484 crore in FY12 and net profit of around Rs 200 crore every year since FY09?

Some lenders fear the worst. aBased on our diligence, we believe the company is inflating its (annual) revenue by $80-90 mn. Accordingly, the number of rigs could be inflated by 30-40 per cent, assuming a few are genuinely idle,a said a creditor in an internal note reviewed by Business Standard. The note says of the 40 rigs claimed to have been owned by the company, only 15 were credibly verifiable. A fund manager with an exposure to the hybrid instruments of the company also said, aThe company claims it has deployed 12 rigs with ONGC. Our own diligence showed they had only six.a

By the companyas latest financials, the gross block was around Rs 3,000 crore. aAccording to our estimates, Shiv-Vani probably spent around Rs 1,200 crore acquiring equipment,a the note added.

Gupta said head already adequately addressed several queries raised by the creditors. aOf the 40 rigs, 17 were 1,000 Hp or more. This is the minimum capacity required in drilling.a According to him, three of the remaining rigs were deployed in Oman. aOf the smaller rigs, we have got regular contracts running on five more, though these account for very little revenue. Other rigs are idle.a

The company has been blacklisted by some private sector exploration companies, such as Cairn India. Recently, Oil India, another state-owned explorer, sought vigilance department clearance for contracting the services of Shiv-Vani, though it was the lowest bidder.

It was also briefly banned by ONGC for certain violations. Gupta brushed it aside as a minor issue. aThere was a small contract on compression services. We should not have applied for that. But, we wanted to use machinery which was lying idle. Instead of deploying staff, we had outsourced it. This person could not complete the job due to some issues. We explained the situation and ONGC accepted it. This matter has been blown out of proportion.a

On the falling stock prices, Gupta said investors in India are yet to understand the nature of this business. aI donat have much control over stock prices. Globally, this business is highly geared. Here people look at the debt-equity ratio, refer to the FCCB (foreign currency convertible bond) liabilities and get worried.a The company has raised FCCBs worth $80 mn, maturing in August 2015. Several public and private sector lenders have also lent to Shiv-Vani for purchase of equipment and other capital expenditure. These include ICICI Bank, State Bank of India, Punjab National Bank, YES Bank, Corporation Bank and IFCI.

A total of 57 promoter group entities, led by brothers Prem and Padam Singhee, own 49.38 per cent in the company. As the debts mount, about 85 per cent of these shares held by the promoter group are pledged with lenders. This could also be putting pressure on the stock prices, as every fall triggers new margin calls and fresh selling creating a vicious cycle, say analysts.

Even as some lenders began asking tough questions, Shiv-Vani moved for a corporate debt restructuring (CDR) plan. Gupta hopes the company will bounce back after the CDR. aThe restructuring of debts will result in improvement in the liquidity and strengthen the core operations, which will lead to value addition of the stake holders in the long term.a

The Mark Mobius pick that bombed

Gitanjali Gems promoter, others barred from trading in stock market

ET Bureau Jul 19, 2013, 04.28AM IST

MUMBAI: One of the country’s top diamond merchants _Mehul Choksi_, _Prime Securities_, a broker, and more than a dozen other entities that dealt in Choksi-controlled _Gitanjali Gems_ have been barred from trading in the stock market for six months.

_National Stock Exchange_, which is investigating the unusual volatility in the Gitanjali stock and its subsequent crash, has disabled the unique client codes for as many as 26 entities which were active traders in the counter. Shares of Gitanjali Gems have fallen nearly 80% to Rs 115.6 since June 24

Gitanjali, like other diamond houses and _gold_ merchants, has been facing difficulties following Reserve Bank of India’s recent restrictions on gold imports. Bankers are also reviewing exposure limits to many diamond houses, which traditionally operated on a high leverage.

Gitanjali is among the very few listed jewellery companies. “I’m not aware of this. I don’t want to comment,” Choksi told ET over the phone.

At a time a slow market and credit crunch have turned things difficult for jewellers, Choksi and entities dealing in Gitanjali shares have come under regulatory glare.

The entities facing NSE ban include Albers Diamonds, Avtar Gems, CLT Investment, CSA Holding, Facet Electronics, Fender Mercantile, Jaiwanti Mercantiles, Jinal Infratech, Jinal Mercantile, Magnifique Gems, Manoj Madhav, Mehul Choksi, Pinky Agro, Prime Research, Prime Securities, Primesec _Investments_, Rhoda Infrastructure, Rishabh Technomarine, Sadhiv Mercantile, Sancheti Properties, Sarvin Mercantile, Shraddha Garments, Sneaking Infrastructure, Somerset Infrastructure, Trusha Infrastructure and Vankars Gem & Jewelleries.

Significantly, Trusha and Sarvin, which are among the banned entities, have filed FIRs with _Mumbai police_ against Prime Broking. The link between Prime, Gitanjali and these clients is a complex one. Many of these investors purchased Gitanjali shares through Prime Broking, which allegedly pledged these without their consent to take exposure on the derivatives segment of NSE.

Gitanjali, which owns brands like Nakshatra, Gili and D’Damas, is currently negotiating with a clutch of banks to convert their non-fund exposure into funded credit lines.

Gitanjali Gems promoter, others barred from trading in stock market

Weekend death for Indiaas largest animation firm

ByYogesh SadhwaniYogesh Sadhwani, Mumbai Mirror | Jul 22, 2013, 10.21 AM IST

One the country’s largest animation companies is on the brink of closure. On Saturday, Crest Animation Studio, Ghatkopar, asked most its employees to leave as it was unable to pay them. The 250-odd animators however refused to quit and demanded they be paid their dues, which have been pending for the past nine months, leading to a stalemate between the cash-strapped firm and its equally broke employees.

In the evening, employees finally left for the day but not before they roped in Maharashtra Navnirman Workers Sena to keep a check on the managment and ensure they did not shut shop overnight, leaving them high and dry. It all started with managaing director of Crest Seemha Ramanna coming to the heaquarters at Raheja Plaza in Ghatkopar on Saturday and announcing that company would not be able to sustain the team of 250-odd animators.

“She told us that 90 per cent of us will have to go. She also announced that from now on P Rajasekhar, former chief operating officer of the company, will be spearheading operations,” said one of the employees.

The employees, who haven’t been paid their salaries in months, nonetheless did not anticipate such a move. “For almost two years our salaries have been an issue. Salaries have been ariving late and at times we only get a portion of it. As of today our salaries for the past nine months are due. But in all this there hasn’t been any talk of shutting the company down,” said another employee, who has been with Crest for the past 15 years.

Insiders revealed that Ramanna suggested phase-wise payment of dues, with the first chunk coming by September. “We did not buy her talk as this is not the first time she has made such an offer. Last time she promised that our salaries would be paid in full by July 10 but when the date arrived she was nowhere to be seen,” said an employee who has been with Crest for eight years.

Rajasekhar, who makes a return after having worked for Crest before 2011, also tried to pacify the employees, but in vain. He discussed a turnaround strategy that would allow them to reduce costs and re-hire most of the employees in next few months. This too did not go too well with employees, who immediately approached MNS. By afternoon, MNS workers knocked on Crest’s doors. They announced to Ramanna that they had formed a union and any attempt to shut down the place or fire employees would not be taken lightly.

The stalemate however continued with Ramanna maintaining that there was no other way out and employees refusing to quit. In the evening, most employees left for their homes, while a few stayed back to keep an eye on the office. They feared that the management would wind up operations and move out on Sunday. The group has now decided that a few of them will stay back every night to keep vigil.

When Mumbai Mirror contacted Ramanna, she said she was caught up in meetings and would be able to talk later. Rajasekhar for his part explained that the company was going through a financial crisis.

“Crest does not intend to cheat any employee of his dues. Unfortunately, the company does not have resources to pay them all right now. Seemha Ramanna is single-handedly trying to keep the company afloat and all the employees must stand by her side in these testing times,” he said.

Weekend death for Indiaas largest animation firm

Banks delay Winsome’s Rs 2,500-crore loan recast

By Sangita Mehta, ET Bureau | 26 Jul, 2013, 05.07AM IST

MUMBAI: Lenders put on hold the application of a Winsome Diamonds unit for a Rs 2,500-crore loan restructuring pending forensic report amid fears that the account may turn out to be another _Kingfisher Airlines_ with no security to back the loans.

Though the presence of founder Jatin Mehta at the meeting, with officials led by PNB, erased fears that the owners have fled because of financial trouble, it did little to influence banks into recasting the loans, said two persons familiar with the discussions.

Banks, which have in aggregate lent Rs 6,500 crore to the group - Rs 4,000 crore to Winsome and Rs 2,500 crore to Forever Precious, have ordered an audit of its accounts to find out how such a big company got embroiled in financial trouble at such a rapid pace.

Banks have turned cautious after they suffered heavy losses in making huge provisions for bad loans in the June 2013 quarter after a letter of credit of Winsome Diamonds, formerly Su-Raj Diamonds, and Forever Precious Jewellery devolved on them.

This brings into focus the _Indian banking_ industry’s vulnerability in unsecured lending. Bankers are struggling to recover dues from _Kingfisher_ Airlines to which they had lent over Rs 7,000 crore without adequate security. Although lenders are selling shares of Kingfisher pledged as collateral that could hardly cover a portion of the total loans.

Restructuring of both the jewellery companies was discussed at the CDR _forum_, a platform where lenders and borrowers mutually agree to recast a loan leading to lower _interest rate_ and an extended tenure. But neither was admitted at the CDR. Indeed, bankers want Mehta to show more commitment to the company since he has quit the firm.

“Lenders have told Mehta that he will have to join the board at least as a _director_ to convince lenders about his commitment,” said a lender present at the meeting. “He has to be back as the face of the company.”

Banks delay Winsome’s Rs 2,500-crore loan recast

Sebi imposes Rs 4 lakh fine on 2 entities in Sanjay Dangi case

Mumbai, Wed Jul 31 2013, 20:43 hrs

Capital market regulator Sebi has imposed Rs 4 lakh penalty on two entities for failing to comply with the summons during an investigation into share price manipulation by Sanjay Dangi and associates. In two separate orders issued on Tuesday, Securities and Exchange Board of India (Sebi) slapped Rs 2 lakh each on Lotus Capital Financial Services and Ganga Jamuna Financial Advisors for failure to provide necessary information to the regulator’s Investigation Authority (IA). The summons had sought details from Lotus Capital and Ganga Jamuna regarding their connection and business/financial dealings with any of the entities which were allegedly part of either Ashika Group or Dangi Group, among others. “…the noticee did not submit all the required information/documents as sought by the Sebi summonses dated November 3, 2011 and November 22, 2011,” the regulator said in the two orders.

It added that “not submitting complete details to the summonses appears to be a deliberate action on the part of the noticee to not cooperate with the regulatory mechanism, especially when sufficient opportunity was provided”. It observed that “such non cooperation and default” is an impediment to the investigation process and is detrimental to the interest of investors in securities market. Sebi had passed an interim order in December 2010 banning Dangi, his associates and promoters of four companies .Murli Industries, Hubtown Ltd, Brushman (India) and Welspun-Gujarat Stahl Rohren. The order was based on a preliminary probe which had found a well-planned strategy to manipulate the share price of the companies before the issuance of the Foreign Currency Convertible Bond (FCCBs).

It was prima facie observed in the interim order that the Dangi group along with the promoters of various companies had indulged in fraudulent and unfair trade practices relating to securities market, among others, Sebi said.

Sebi imposes Rs 4 lakh fine on 2 entities in Sanjay Dangi case


thanks a lot on putting up these cases.

could you let us know whether there is any fraud happening in MCX-FT?


Many thanks for the diligent tracking and putting up of these cases. It’s a great service to us fellow investors. We hope many more will be inspired to add to your efforts, and take up on themselves - the job of tracking/updating - something that they follow closely.

Request everyone to also provide links to the original articles. That helps add credibility and authenticity, besides properly crediting the Source. Plus, if one wants to explore more - they can directly go the source.

FT and MCX shares are falling becoz of expected payment default to the tune of 6000 crs by FT promoted NSEL (national spot exchange). There are severeal article on the net. I think following will provide you good info.

Agri processing companies like Adani wilmar seems to be big players at NSEL. They might have delivered fake warehouse receipts (with NSEL knowledge) in exchange for cash during T+1 settelments, the other leg of this T+1 transaction wld be 18% interest seeking arbitrage funds(HNIs?). This Arb funds will sell these receipts in T+30contract for 18% return (1.5% per month),where the buyer will be the agri processor (the seller in T+1 transaction).

Effectively big agri corportes were getting a one month credit @18% interest from Arb funds wihout any security .They use this cash for speculation at NCDEX, MCX, equity and forex derivative markets.

@jagadeeshwar reddy Good Job Keep IT Up.

India Nivesh Take on Dish TV(DISH%20TV))_Company%20Updates.pdf) )- Questionable Practice?

This is not exactly a fraud related report but a similar thing where management has done gross misallocation of capital.


Dish TV Ltd (DISH TV)…Why management purchased aircraft?

Why management purchased aircraft?**

i Referring to FY13 annual report, we figured that DISH TV bought aircraft forRs.337.6 mn, which would be depreciated over useful life of ten years.


Our Take


i We remain clueless, why management purchased aircraft even when companyis struggling to come in black. Further, the companyas debt burdened balancesheet along with negative reserves does not justify this move.

i Instead of enhancing competitive intensity (v/s Cable Operators & MSOas),promoters preferred to invest into luxury. This raises red flag on managementasintention to create shareholder value. However, the amount invested intoAircraft is only ~5.3% of total cash & liquid investments. What matters here isnot the amount but direction of allocating resources.

i Further, we believe in order to avoid tough question from investors duringthe conference call DISH TV delayed FY13 annual report and released (on 30ththJuly 2013) only after Q1FY14 conference call (on 26th July 2013).

India Nivesh Take on Dish TV(DISH%20TV))_Company%20Updates.pdf)

This isa case of indian promoter running a private companywhich has conflict of interest with his listed entitiy.

"Khoday India Ltd has submitted to BSE a copy of the report published in the Times of India news paper dated June 06, 2013 in all its editions in India, concerning our Company, erroneously mentioning that Khoday India Limited has “inked a strategic brewing pact with SAB Miller” to produce various brands of beer belonging to the latter.

We have since clarified to the Editor of Times of India news paper that the agreement referred to in their news report is actually between SAB Miller India Private Limited & Khodays Breweries Limited, which is an unlisted public company in the Khoday Group and our listed Company Khoday India Limited is not at all a party to the said agreement. Subsequently, Times of India in their edition dated June 08, 2013 has published a clarification at page 24, regretting their error."

Investors should always check if promoter’s unlisted entities have a conflict of interest withthe listed entity.

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one of my checklist is to see any regulatory case against company in past. it can be found at

thanku Ashish :slight_smile:


That link is very helpful. Thanks Ashish.