Regulations
Blessing Agro Farm India directed not to collect money from investors by SEBI

Blessing Agro Farm India was found collecting funds from the "customers/ investors” for its land schemes, prima-facie violating the provisions of the SEBI Act and SEBI (Collective Investment Schemes) Regulations, 1999

 

A SEBI order today restrained Blessing Agro Farm India from approaching investors for money. The order inter-alia directed the company, its directors viz., Innsaipillai Lurdpillai Joseph Jeyaraaj, Prakasam Sagaya Packia Santhi, Irudayaraj Manickam Pillai Jeyabalan and Ex-Director Santhanapeter, not to collect any fresh money from investors under its existing schemes and not to launch any new schemes or plans or float any new companies to raise fresh funds.

 

The SEBI order directed the company and its directors not to dispose of or alienate any of the properties/assets of the existing schemes and not to divert any funds raised from the public, which had been kept in bank accounts and/or in the custody of the company. The company was also directed to submit a full inventory of its assets, details of amounts mobilised and the investors.

 

Blessing Agro Farm India Limited a company having its registered office at Madurai was found collecting funds from the "customers/investors” for its land schemes, prima-facie violating the provisions of the SEBI Act and SEBI (Collective Investment Schemes) Regulations, 1999.

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SC directs Centre to submit CVC candidates' names

CVC appointment process to continue under SC supervision, while the PIL against the appointment process is decided

 

The Supreme Court today directed the Centre to submit a list of 15 names of candidates for the post of the Chief Vigilance Commissioner (CVC), by 15 January 2015. The SC also directed the Centre to obtain its permission before making the final appointment.
 
The SC was hearing a PIL accusing the Centre of lacking transparency in the process of appointing the CVC. There has already been a question on the requirement of a Leader of Opposition in matters of such sensitive appointments. 
 
"Transparency should be the hall mark of such selection procedure and existing system is being criticised because of lack of transparency," the SC bench said. The Court criticised the fact that only bureaucrats were picked for the post.
 
In an earlier hearing in September, the court had criticised the government for the shortlisting process being left to senior bureaucrats in the many ministries. The PIL had said that in doing so, the government was adopting a non-transparent, restrictive and non-uniform approach for the appointment.
 
The Centre had said it was in the process of short-listing 20 candidates from 120 names received by various ministries and that the job was being done by the cabinet secretary and 36 secretaries of other departments. 

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Economy & Nation Exclusive
Why is Modi govt bailing out the rich promoters of SpiceJet with our money?

The Modi government is reportedly ‘requesting’ banks to fund SpiceJet when the money is certain to be wasted. The UPA government at least, did not publicly put pressure on banks to lend to Kingfisher Airlines

 

Prime Minister Narendra Modi has stated repeatedly that the government has no business to be in business. But not only is it continuing with every cash-guzzling public sector company cash-strapped SpiceJet is receiving a 'lease of life' from none other than the union government. The Ministry of Civil Aviation (MCA) Tuesday reported to have said that it would take steps to keep SpiceJet from shutting down and for the larger good of the aviation sector. SpiceJet is neither a state-run carrier like Air India, nor its promoters are out of cash. Then why is the government 'desperate' to dole out a financial bonanza to this airline? In fact, if at all the government is keen in helping the company, it should use the method applied to save Satyam Computers.

 

The MCA has asked oil marketing companies (OMCs) and airport operators, like Airport Authority of India (AAI) to give further credit to SpiceJet for 15 days. As on 15th December, the carrier, owned by Tamil Nadu politicians Marans, owes Rs14 crore to OMCs and it require fuel of about Rs5 crore every day. However, according to media reports, SpiceJet operations were grounded on Wednesday morning as OMC refused to give fuel to the carrier.

 

"Indian banks may be requested to give some working capital loan based on the assurances of the promoter,” the statement of the MCA said. In a country like India, “may be requested” is a government order, given that public sector banks bend backwards to oblige politicians.

 

According to media reports, banks or financial institutions could lend up to Rs600 crore backed on a personal guarantee from the SpiceJet chairman Kalanithi Maran, with a rider that it would be paid immediately after securing the long-term investment, which is expected to take around eight weeks.

 

The Ministry is also requesting the Finance Ministry to allow SpiceJet to opt for external commercial borrowing (ECB) for working capital as special dispensation as was done in the 2012 when a similar crisis had arisen in the aviation sector.

 

It is strange that the Narendra Modi government is keen to bail out a carrier, owned by an extremely wealthy family of politicians, when it is clear that the airlines’ days are numbered. The promoters know it very well. SpiceJet, which is suffering huge daily losses and the wrath of consumers due to flight cancellations, will have to remain operational using its own recapitalisation strategy as the promoters. However, according to a media report, the promoters will not inject additional capital. "We do not have the liquidity to invest large sums at the time which is why we need bank financing. For which the promoters are willing to provide a guarantee. We cannot do more than this," SL Narayanan, chief financial officer of Sun Group told Reuters on Wednesday.

 

Since, even the Sun Group, the parent of SpiceJet is not ready to infuse any money into the carrier, why should MCA “request” the banks to lend Rs600 crore?

 

The ‘request’ from the Ministry to banks for lending money to a cash-strapped carrier is unprecedented. Even the previous Manmohan Singh led United Progressive Alliance (UPA) government had not done this for the now defunct Kingfisher Airlines, that too when the carrier had an influential and well connected promoter.

 

SpiceJet, which reported its fifth consecutive quarterly loss, has been trying to raise fresh capital for much of this year. On 24 November 2014, the promoters of SpiceJet, informed the BSE that they are seeking investors to raise fresh capital and return to profitability.

 

The airline, controlled by Kalanithi Maran's Sun Group, said that a few parties have approached it and evinced interest in making an investment. "However, since the deliberations with such prospective investors are at an exploratory and preliminary stage, it will be improper to comment on the specifics of any possible stake sale or valuation at this stage," they clarified.

 

Earlier in June 2012, SpiceJet reported profits, a rarity for an airline. Its net profit for the quarter ended June 2012 grew to Rs56.15 crore when compared to a massive loss of Rs71.96 crore recorded in the corresponding quarter of the previous fiscal. However, the auditors have voiced their concerns in their review report.

 

Auditor SR Batliboi & Associates, revealed that it had used accounting tricks to boost net profit. The auditor noted had said, “No provision has been made for interest of Rs747.1 lakh up to 30 June 2012, relating to earlier years on the outstanding inter-corporate deposits taken by the company. Had the same been accounted for, the net profit (after tax) for the quarter ended 30 June 2012, would have been lower by Rs597.60 lakh and accumulated losses as at date would have been higher by the same amount.” Even an exceptional income of Rs12.86 crore boosted SpiceJet's net profit. The income in question was the warranty claim set against some of the exceptional costs it incurred on engine repair last year.

 

In April this year, the Directorate General of Civil Aviation (DGCA) slammed SpiceJet for offering tickets at just Re1. It termed SpiceJet’s offer of Re1 across its domestic network as 'predatory' and a 'malpractice' and directed the carrier to immediately stop the offer.

 

Moneylife has had the opportunity to cover the stories of the domestic carriers, which have been indulging in price wars (http://www.moneylife.in/article/indian-aviation-price-war/36101.html), while all the time complaining of huge burden of interest payments on their capital purchases and the heavy losses that they were incurring, year after year. If what they claim is true, why in the world should they commit suicide by offering uneconomic rates, which presumably do not cover their break-even points?

 

There is absolutely no reason of pumping taxpayer's money into the ailing carrier which is what it would mean, if banks do lend to the airline that is certain to close down sooner or later.

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COMMENTS

K P Nagarajan

2 years ago

Issue GOI is trying address is not about promoters or any favoritism but that of Aviation in India..when one is looking at mending economy we cannot have aviation co dropping dead regularly.

Vinayak Bhimrao Mudholkar

2 years ago

One of the major reasons for the problems of Airline Industry in India is ‘the unfair Undercutting of Fares’ to retain/gain market share, may be due to Buyer's Market. (This is what happening in the International Crude Oil Market)....This is exactly opposite of forming a cartel in a Seller's Market. Markets can't always be relied upon for Price Discovery !

rs

2 years ago

Absolutely right. Especially when the promoters family members are facing various charges. What is actually happening..?

shanker

2 years ago

What is the vested interest of Modi Government ? Please spell out ?

Dayananda Kamath k

2 years ago

it should be noted that the problems in spicejet commenced after Mr. Maran took over. May be a good industry to launder money. govt should probe these investments also. should not favour with extra benefits.

t j ethiraj

2 years ago

Why all airlines in India are becoming bankrupt.
1 is it high cost of aviation fuel
2 high landing charges
3 poor occupancy
4 high wage bill
5 siphoning the funds buy promoters
6 mismanagement
it is the bankers and share holders are put to lose and not the promoters
t j ethiraj

Ralph Rau

2 years ago

The security for this loan is a personal guarantee from Mr Maran ?!

I assume Mr Maran is a wise man who has placed all his assets in a personal or family trust ring-fenced from all personal liabilities.

REPLY

B. Yerram Raju

In Reply to Ralph Rau 2 years ago

How many money decrees are filed by the banks against the personal guarantees of these 'great' directors/Chairpersons when the corporate loan turned a bad loan? You can perhaps, if at all claimed, count them in fingers across the country. This personal guarantee should be actually be limited to the net worth of the individual and not the extent of the total loan of crores of rupees. billions of rupees are guaranteed by individuals worth their upper garments. A shame on the lending system.

B. Yerram Raju

2 years ago

Finance Ministry should keep its hands off and stop advising banks on any client - whether public or private sector firms. Once it does this kind of advisory, banks would have a lever to explain their bulging NPAs and throw them at the doorstep of the Government for refurbishing capital to the extent required.
It is enough if the Government, as owner, keeps its share in the capital to the extent of 51-52 percent and allow banks to find their pulse in the market for meeting with the capital deficits.
NPAs, CDRs, capital are all inter-related issues concerning financial stability.
PSBs are also indulging in financing corporate entities on the basis of fictitious or dubious assets in SEZs. It is time there is enough public voice against these types of billions of rupees of credit outflow. Assets in bank books that do not generate incomes are responsible for high rates of interest.This would tantamount to indirect interest subsidy from the performing segments. We are carrying the burden of uncompetitive interest rate structure that is pulling down the aspiring manufacturing 'make in India' sector. I wish the Money Life organises regional seminars half-day in all the leading metros to keep the advocacy on financial sector reforms on high pitch.

REPLY

Gupta

In Reply to B. Yerram Raju 2 years ago

These problems can't be solved by seminars if government still owns 51%. The problem is not NPA or chairmen or corruption or governance. Root cause is public sector ownership. Get rid of entire shareholding in these banks and see the dramatic change. RBI will be good enough to regulate them then. The stark difference in NPAs, restructured assets, frauds between public and private sector is testimony to the fact that the problem lies with ownership. Curing the symptoms will not solve the issue. Cure the disease.

B. Yerram Raju

In Reply to Gupta 2 years ago

Private sector is no haven of virtue. It is private corporates that are looting the PSBs with the support of government. Today, it is the informed public and activism and PLIs that would resolve the issue. How many people know the extent of unoccupied chunks of land assigned in the name of industrial development and put to blatant misuse/abuse by the private corporate giants with absolute connivance from the government both centre and states? Judiciary seems to be the only route. Informed public should alone take up these issues with reliable data and information and not on emotion.

Gupta

In Reply to B. Yerram Raju 2 years ago

Informed public like people here can keep talking. Who is listening? As you rightly said, private sector is looting public sector banks. Why don't they similarly loot private banks or foreign banks? Why ICICI managed to get rid of its kingfisher exposure, but not public sector banks? Why did foreign banks not lend money to kingfisher or spicejet? Are private or foreign banks born smarter? No... It is simply what incentives drive what kind of behaviour. are the priorities ser right for our public banks? Or can they be set right without changing the whole political and bureaucratic system of the country. I don't think so.

Rajan RG

2 years ago

Rs.70 billion has been written off due to KFA and now banks are pushed to give additional loans on personal guarantee. Small customers are charged for Rs.20 for withdrawing their own amount and defaults in crores are willfully allowed in India. If any middle class person would have taken a vehicle loan or home loan how the banks are recovering it quickly? But if the loans are in crores you get royal treatment.

Dr. Rakesh Goyal

2 years ago

DMK has 4 MPs in Rajya Sabha. Can there be any chance of quid pro quo?

Gupta

2 years ago

Hope this serves as a wake up call to those revelling in modi mania in this country. Despite good intent, no one individual can be smart in all the fields. Hope the PM realises that he needs proper assistance from knowledgeable people in their respective fields and gets one sensible economist to run the country instead of a tired lawyer who has no clue about how to spell finance. Stop being a one man army, people globally are already talking of key man risk in India. The title of this article is 'Modi govt' instead of 'BJP Govt' for a reason.

Bunch of ignorant souls running finances of this country now.... They can even put our President to shame, who single handedly damaged the credibility of the whole country with his Soviet era ideas!

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