McLeod Russel India: Stock reaction appears overdone, says Nomura

Any concerns on the outlook for India tea prices for FY14 on the back of trends in Kenya may be a kneejerk reaction, says Nomura Equity Research

McLeod Russel’s stock price decline of 15% over the past two trading sessions is an excessive reaction, According to Nomura Equity Research in its Quick Note, to the recent tea price trends in Kenya, the outlook for domestic demand and prices in India remains robust at this point. This was reinforced during the brokerage’s discussion with J Thomas, the world’s largest auctioneer of tea. They suggested that any concerns on the outlook for India tea prices for FY14 on the back of trends in Kenya may be a kneejerk reaction. Key takeaways from the discussion:


  • The first flush tea crop is largely for the domestic market, and J Thomas indicated good demand visibility in the Indian market. They therefore do not see any impact on the first flush crop from Kenyan price trends. If at all, it is the second flush crop (starts from 10th May and continues to end-June) which gets exported, where there may be some impact (assuming the trend in Kenya doesn’t reverse).


  • Given that some of the land has been diverted for orthodox production in India, CTC (McLeod mainly sells CTC) supply has become tighter.


  • Opening tea prices will be visible in the 17th week auction and are expected to be higher. The current prices of very small quantities have been higher by Rs10-Rs15, but they are still not representative and the full impact will be visible from the 17th week. More than a single data point on opening prices, they remain positive on the outlook for tea prices in India.


  • Typically there used to be inventory in the system of the prior season which continued until the early part of the new season. But now inventory levels have been running extremely low.


  • Global demand supply is still tight and is expected to remain that way for the next three years.


As per Nomura’s observations, two months of higher production in Kenya (Kenya has produced 83.9 million kg in Jan-Feb2013 versus 54.6 million kg last year, when the crop was impacted by weather) has meant that tea prices in Kenya in CY13 have gradually come down from $3.08 at the end of CY12 to $2.49 in the 13th auction (average prices in Kenya in CY13 are at $3.02 still higher than last year similar period average of $2.96). Part of this is due to recovery of lost production in Kenya, which produced 369.2 million kg in CY12 (versus 377 million kg in CY11 and 398.7 million kg in CY10).


Ex-Kenya production is only marginally up in Jan-Feb, as Sri Lanka has produced 48.5 million kg in Jan-Feb (versus 45.3 million kg last year) and India has produced 34.9 million kg in Jan-Feb (versus 33 million kg last year), while Malawi and Indonesia put together have produced 20.2 million kg in Jan-Feb versus 23.8 million kg last year. Empirically in CY11 Kenyan tea price was down from $2.98 at the starting of the calendar year to $2.69 in the 13th week, but McLeod Russel average exports realization for FY12 closed at $2.93 versus $2.86 in FY11.


Nomura had a discussion with the CFO of McLeod Russel on the company’s outlook for Indian tea prices in FY14, especially in the context of recent production and price trends in Kenya. He highlighted the following points:


  • McLeod Russel expects Rs10-Rs15 increase on their own crop for FY14 as domestic demand remains robust, and in his view it would be premature to extrapolate production and price trends in Kenya.


  • April production in India has been good, and indications are that they may recover around 2.7 million kg of its own crop that the company lost last year in Q1.


  • The tea major plans to increase bought leaves production from around 18.5 million kg in FY13 to 25 million kg in FY14 (it is currently factoring in only a 2 million kg increase in bought leave tea production in FY14). Assuming an EBITDA/kg of rs35 (irrespective of prices), this alone could lead to incremental EBITDA of around rs210 million.


  • Normalized production in FY14 would mean a recovery of 6 million kg of lost production in FY13. This would mean that even if one assumes flat realization (own crop realization was around Rs176 in FY13), the company could generate incremental EBITDA of Rs950 million.


According to Nomura, McLeod Russel currently trades at 5.3x FY14F EBITDA (3.9x adjusted for treasury shares) and 7.2x FY14F EPS (5.7x adjusted for treasury shares). If one assumes that realizations remain flat, on normalized production the brokerage expects FY14 consolidated EBITDA close to around Rs5,549 million and EPS of Rs37.6.


The brokerage further adds, so in a flat realization scenario for FY14, the stock trades at around 5.8x FY14F EBITDA (4.3x adjusted for treasury shares) and 7.9x FY14F EPS (5.9x adjusted for treasury shares). “This is still a very attractive valuation, in our view, especially in the context of a strong free cash flow yield of around 9.8%,” said Nomura.


Why RBI is still dragging its feet over polymer currency notes?

The central bank must clarify whether we have the necessary technology and equipment to mint these polymer notes within the country and announce the timeframe within which these notes would be launched into the financial system

The Banking Ombudsman of Karnataka recently had organized a meeting in Mangalore. Reserve Bank of India (RBI) deputy governor, Dr KC Chakrabarty attended this Town Hall Meet, where, in reply to a question on plastic notes, he confirmed that these notes, in Rs10 denomination, “will be introduced on a trial basis”.


He stated that the average life of a paper currency note was about nine months, which got soiled and torn, whereas the plastic notes would last for several years. Besides, these notes will also prevent counterfeiting.


It may be recalled that Moneylife carried an article on the urgent need to introduce polymer currency notes (Polymer rupee notes: Slow or no progress? ) more than six months ago!


In fact, when that report appeared in Moneylife, the RBI had introduced polymer currency notes of Rs10 denomination in several selected cities, including Mysore in the south.


It is therefore surprising that KC Chakrabarty did not elaborate on this issue and say how this trial was received, not only in Mysore, but in other centres as well?  Why he did not share the news of this introduction for market testing in the selected cities is a mystery!


It is well-known that Australia is the pioneer which introduced the polymer currency notes more than two decades ago and is one of the most successful exponents of this system.


While we appreciate that an attempt is being made in the right direction, we must not overlook that circulation of counterfeit currency has increased and the media reports appear, from time to time, that large quantities of supplies are coming through smugglers across the border. Arrests are also made and police reports indicate that distribution chains are well entrenched all over the country.  These reports also show that supplies are emanating from Pakistan and smuggled via the land borders of Bangladesh and Nepal.


In any case, with elections around the corner, this influx of counterfeit notes is likely to increase and disrupt our democratic election process.


What we need to do, on a war footing, is to obtain supplies of polymer notes of Rs500 and Rs1,000 denominations and introduce them immediately. It is believed that the counterfeit notes are mostly in these denominations, and so, if the ultimate intention is to stop these coming into circulation, the RBI must go hammer and tongs at getting the polymer notes.  Introducing polymer notes in Rs10 denomination would not be very useful.


RBI knows that Australia has the knowledge and expertise in polymer notes. It is not easy to counterfeit the polymer notes and our efforts should be to get the higher denominations in these notes rather than Rs10.


It is imperative that RBI must make a clear-cut statement on the progress made so far in the trial that was carried out in selected cities. The central bank must clarify whether we have secured the necessary technology and equipment to mint these polymer notes within the country and categorically announce the time-frame within which India will launch this into the financial system.


In the meantime, our security forces at the borders must be trained and intelligence system intensified to prevent large-scale smuggling of currency which goes undetected!


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)




4 years ago

Any note changing process will happen only after the general elections in 2014 which is the time when black money will change hands. Changing into a new note type will bring the black money to 0 which is why the politicians will oppose along with the businessman. I'm in Australia and found here that Polymer notes are more durable and they have enhanced the polymer formula for it to be more durable over the years. Indians are as good or as bad as anyone in the world so no offense to any race. If there is ever a change in currency notes the Indian cash economy will die a fast death.


4 years ago

In Australia even $5 polymer notes are in currency. The notes may be costly, but it has a lifelong use.

anantha ramdas

4 years ago

In response to Mr Naresh, all I can say is that more than 20 countries are using polymer notes and are successful.

You appear to undermine the intelligence and responsibility of Indians and please do not say that they are not capable of using these polymer notes. If they are able to accept and use soiled and torn paper currency notes, they are perfectly capable of using the polymer notes.

The question here is stopping the counterfeit notes that will undermine our democratic system. Certainly, polymer notes will not reduce corruption, but that is because everyone who uses this system does it for expediency and irresponsibly.

Be proud, sir, Indians are a force to be reckoned, and it is our core responsibility to ensure that we do not fall into or encourage corrupt practices.


4 years ago

Polymer notes are balderdash. They are more expensive, and once they tear from any end, the tear completes until the note is sliced into two! It is not for India. India and Nigeria are known in the world to have dirty, soiled notes because the populace does not handle notes well. Besides the RBI is concerned about farming out the note printing process to an Australian company.


4 years ago

Because China and Pakistan will do a better job than the Quota-Corruption Raj?


4 years ago

Because China and Pakistan will do a better job than the Quota-Corruption Raj?


4 years ago




In Reply to PRABHAT 4 years ago

Why have income tax? Why criminalize anyone making money? Or else have standard 10% for everyone over, say, 5 lakhs per year, with no debate or allowances. Make it easy for citizens to be honest, simplify rules so ordinary folks understand them clearly. Have a sales tax after exempting basic necessities.


In Reply to PRABHAT 4 years ago

Great Idea

Veeresh Malik

4 years ago

And then some more here please, again, we did not hear of this in the Indian media:-

Veeresh Malik

4 years ago

This may be of interest to MoneyLife and readers:-

""''Brown commented that agents had many expenses and were very well connected, with access to the highest levels of the central banks and often the government itself,'' he said in his statement.
''The actual word 'bribery' was carefully avoided,'' he said, but he was told ''Securency paid the agent in India $US120,000 on the understanding that his money would then be forwarded to a political party in the lead-up to the Indian national election''.""

Economy & Nation Exclusive
West Bengal’s ‘chit fund’ mess and inaction of MCA

The massive money, which is raised surely shows somewhere on the balance sheet of the company, filed regularly with the MCA. The primary recipient of the information about these companies is the MCA, and surprisingly the MCA is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish

As the bottom-of-the-pyramid population continues to fret about having lost one’s life savings in the West Bengal “chit funds”, it is interesting to find politicians promising new stringent laws against such funds. In fact, law-making is the least of the reasons for such schemes to have flourished in the state. However, as political connections of one of many that have gone bad are exposed, the easy face-wash for the politicians is in law-making, to cover-up what is quintessentially an implementation issue. The reality is that we are not short of such laws—in fact, we have a plenty of laws that prohibit such schemes and impose sternest penalties for the perpetrators of such scams. But if a Rs22,000-crore scheme questions the very institutions that define our system—Supreme Court, SEBI, or whoever else—there is little surprise that the only succour for political face-saving is in law-making. And this is what we have done over the decades—as the write up below shows.

This article gives a quick overview of the laws regarding “chit funds” or devices of sourcing public deposits.

First of all, the West Bengal “chit funds” are not chit funds at all. Chit funds are a different structure altogether. Chit funds are mutual credit groups where money circulates among the group members, and the monthly contributions of the chit members are received circularly by one of the members who bids for the same at the highest interest rate or lowest “net present value”. Chit funds are perfectly legal, if they are registered under the Chit Funds Act, 1982, and run under the provisions of the law. The several names that keep popping up in West Bengal are not chit funds—these are collective investment schemes  or public deposit schemes which on the face of it do not fall under any law, as they are structured so as to be neither a “public deposit” nor a “collective investment scheme”. But that facial structure is so gullible that any regulatory investigation may easily expose that these schemes were effectively nothing but public deposit schemes.

The evolution of regulatory structure in India is a rare case of human learning—we have burnt our fingers every time to learn that the fire is too hot to handle. So, every scam brought a law; in essence, the law is the edifice built on scams and not on intuition.

  • Deposit regulation: These rules were inserted in the Companies Act in 1975 after several cotton mills in Gujarat and Maharasthra burnt public savings.  In fact, India is one of the few countries in the world which allows non-banking companies to raise deposits from the public. World-over, access to public deposits is allowed only to banks. In India, companies may raise pubic deposits—however, subject to provisions of Section 58A of the Companies Act. This allows only deposits to the extent of 25% of the net worth of the company, places restrictions on interest rates, brokerage, etc.
  • Chit fund laws and money circulation scheme laws: Money circulation schemes were banned by a law in 1978, after Sanchayita Investments went down with money pooled from a few lakh investors in West Bengal. Soon after, chit funds became a hot political issue, leading to chit fund law in 1982.
  • NBFC Regulations: Non-banking financial companies (NBFCs) are allowed to raise deposits up to 10 times their net worth, but this privilege is granted only to so-called “depository NBFCs”. This is a fairly well-regulated institution coming under the RBI, and the regulations have been toned after hard lessons were learnt with the CRB scam of 1997. Accordingly, NBFC Directions were framed in 1998 after few hundreds of NBFCs had gone down with public savings.
  • Private placement scams: Several hundred companies raised money by way of “private placement” of shares taking advantage of a Companies Act provision whereby only “public offers” required regulation by the securities regulators (now Securities and Exchange Board of India—SEBI, earlier Controller of Capital Issues). This resulted into a “deeming rule” in Section 67 of the Companies Act, inserted in 2000, whereby any offer of securities to 50 or more persons was deemed to be a public offer.
  • Collective investment scheme regulations: Plantation companies with schemes such as “money grows on trees” continues to raise public money against collective investment schemes, and it took SEBI several years before the Collective Investment Scheme Regulations were framed in 1999. A collective investment scheme is one where public money is raised for investment in any asset or scheme, other than by way of shares, deposits, mutual funds, etc.
  • Alternative investment funds: This is a new a regulatory instrument under SEBI, to regulate privately pooled vehicles for collective investments. This became effective in 2012. This is by far the only regulation which is not “reactive”.

So, with all these laws, how to scamsters still end up raising several thousands of crores? Obviously, so much money is neither raised overnight, nor raised silently enough, as there is a massive machinery of agents who raise the money from the very bottom of the population pyramid. Each scamster innovates an ingenious device, but none of these devices are not iron-clad to avoid regulatory action, provided there was a will power.

Here is an inclusive inventory of the schemes currently in use:

  • Debentures: Sahara used the argument that (a) Sahara was issuing optionally convertible debentures which were not ‘securities’ under securities laws, and hence, were free from the securities regulations, and were not ‘deposits’ under the deposit regulations, and therefore, to be regulated by none. The Supreme Court ruling has rubbished the first argument.
  • NBFC companies: The Companies Act rule restricting issue of  securities to less than 50 in order to escape the “deemed public offer” rule does not apply to NBFCs—hence, several of the “chit funds” use an NBFC to raise instruments such as debentures not regulated under public deposit rules.
  • Preference shares: Some of the entities issue preference shares to the depositors. A preference share is essentially the capital of the company, and not a deposit.
  • Land deals: Some companies contend as if the so-called depositor places order for purchase of land by the promoter. Later on, the land deal is cancelled, and money is returned with interest.
  • Advances for purchase of goods: Some operators show as if the ‘deposit’ had actually placed an advance for purchase of goods. The order is later cancelled and money is refunded with interest.

No matter what is the device used, the common thread in each of these schemes is that the flow of new ‘depositors’ must keep coming in, because the only source from which maturing deposits could be serviced is by inflows from new depositors. Money is initially raised at hefty interest rates, and with attractive periodic prizes, gifts, gala parties, and so on. The agents who mobilise the deposits are given hefty commissions, because the structure essentially relies on a highly incentivised structure of brokers or agents, who reach right to the doors of the depositors to collect deposits. The cost of interest, plus the agency commissions, the luxurious spendings on so-called depositor prizes, and add to all this the lavish remunerations of the promoters themselves—all adds to a huge cost of interest, say, about 25% to 30%, which no lawful business may produce. It is not that these promoters are blue-eyed investors who know tricks of investing—so, they end up investing money in illiquid properties, resorts or hotels.

Now, the only way to keep servicing investors is that new depositors must flow in, so that old depositors can be repaid. That is, the base of the depositor pyramid has to continue to expand so that those up in pyramid can be paid—this is what Ponzi schemes are all about.  This is what we call “tiger riding”.

Soon, the ride comes to and, and guess what happens at the end of any tiger ride! In the process, thousands of gullible investors have lost their life savings.

As hundreds of crores are raised though tens of thousands of agents, surely enough the exercise is not invisible to the regulatory eye. The massive money which is raised, irrespective of the label, surely shows somewhere on the balance sheet of the company, which is filed regularly with the MCA (ministry of corporate affairs). The primary recipient of the information about these companies is the MCA, and surprisingly, it is the MCA which is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish.

No, it certainly is not the lack of laws that allows these scamsters to rob people of hard-earned money. It is clearly an implementation issue.

(The author is a noted expert in financial laws. A lots of author’s writings appear at and



Amit Trivedi

4 years ago

Wonderful article. Very insightful.


4 years ago

I don't know how many of you know how WASTE Bengal runs? In every aspect of life, the person who breaks the law is the king. Its sheer muscle and political power. They could make MCA go round in circles for years. It is better to stop this blame game when as human beings we have ruined our country. Let us stop blaming politicians for the mess all around and look at our reflections at times

shanti Patel

4 years ago

This is the country of paper laws.
Laws are implemented after the tragedy happens!
Take the house crash at Mumbra where more than 75 people died.
Government admitted that more large portion of buildings constructed were illegal. THere is no accountability. Every law that is enacted leads to source of HAFTA for government BABUS.
Thanks to MEDIA and our COURTS without which god only help india!

Shanti Patel


Dayananda Kamath k

In Reply to shanti Patel 4 years ago

don't you think media also playing into the hands of politicians and burocrats. instead of pressing for proper implimentation of existing law they clamour for fresh stringent laws. which gives scope for politicians and burocrates new avenues to harass the common man and a new source for corruption.punishment should be based on the crime and not on the basis of who has done it. the special laws being enacted are actually violation of basic principle of constitution of equality. and every special law has been abused.

Dayananda Kamath k

4 years ago

as long as sri b.p.bimal is undersecretary in mca you can not hope for any improvement. once i sent a complaint with the heading a satyam in nationalised bank regarding fudging of accounts. and he has the audacity to inform me that there is no provision under the law to refund money from investor protection fund. then i asked him from whe interest charged to loan accounts are being credited to investor protection fund. and again with a different ref no. and date he sends the same reply. this matter brought to the notice of salman khurshid and then to veerappa moily and recently to sachin pilot. when they are incharge of ministry of corporate affairs. but no reply no action so far.


4 years ago

Mr. Khotari, Thnaks for the piece written here. every body in the Professional world knows you in Kolkata. May i ask you why don't you take up the matter with the Regional Director(Eastern Region) or the MCA officials in this matter.

You being a professional know this very clearly why MCA is the least proactive in this case. These people takes money for everything they do, whether it is incorporation, commencement of business or granting approval under the Companies Act, 1956.

You pay them and can get any approval, be it approval under Section 295 or 297 or any other sections of the Companies Act. It is us professionals that have created an atmosphere which is now maligning the image of our country and destroying the people of our country.

Its high time that as a professional you being a senior take this matter with the authorities.


4 years ago

Is MCA above the CM of West Bengal? How many have of the depositors have moved SEBI/ MCA or RBI? They are thumping their chests in front of her house. She is their God. Good they lost their. Why does not any RTI activist ask for as to who bought her painting for such a huge amount?


4 years ago

As very rightly pointed out, for the first time ever, these so called chit funds of West Bengal are NOT really chit funds within the meaning of the term and that is why the people have been cheated and thestate government e has overlooked the real aspects and allowed these operators to carry on their business. It is strange that the print media in Bengal, the vernacular medias in particular, has ignored the most crucial aspects as brought out in this article.


4 years ago

As very rightly pointed out, for the first time ever, these so called chit funds of West Bengal are NOT really chit funds within the meaning of the term and that is why the people have been cheated and thestate government e has overlooked the real aspects and allowed these operators to carry on their business. It is strange that the print media in Bengal, the vernacular medias in particular, has ignored the most crucial aspects as brought out in this article.


4 years ago

while CHIT-FUNDS are banned,how can biglike this can organies? it must be effileted some big political hand.


4 years ago

Chit Funds are imitating Government in the grandeur of their larceny. Did they, too,like LIC and UTI, invest in ONGC? But, Chit Funds must learntheir limitations. They cannot pass retrospective laws, and, unlike the Governments of China, Pakistan and India, they cannot print authentic Indian currency notes.


4 years ago

I find Shri Kothari’s view naïve, when he states that: “surprisingly, it is the MCA which is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish.” MCA (or its subordinate offices of RoCs and RDs) rarely act on the basis of investor complaints or financial information filed by companies. In fact, any credible action on their part, is an exception. To cut it short, I’ll give an illustration:

1. In 1999 we filed a list of 148 companies, alongwith investor grievances that these companies have disappeared after coming out with an IPO, with MCA and SEBI for examination and inclusion in “Vanishing Companies” list. Further action was to be taken, by MCA and SEBI, as directed by Allahabad High Court in our PIL in 1999.
These Investor grievances were received by us in hardcopy in response to a hard-hitting column written by Sucheta Dalal in Indian Express giving Midas Touch and two other organisations postal address where investors could mail their grievances. The examination of the list was taken up in 2006 and is perhaps still on with MCA!

2. Similarly, we submitted a list of 604 companies to MCA in 2003 which were not available at their offices according to BSE. MCA started examination sometimes in 2006 and to the best of our knowledge, still going us. No company from this list was declared as vanishing company though MCA had confirmed- sometimes around 2007- that about 40 of them have vanished! For details you may see Minutes of CMC meetings on mca website under “Vanishing Companies”. All this happened or is taking place despite High Courts orders. It depicts the state of affairs where regulating companies is under their specific jurisdiction unlike the Sarada group of companies. There is absence of accountability and investor empowerment.

Virendra Jain
President, Midas Touch Investors Association


Vinay Joshi

In Reply to V K JAIN 4 years ago

Mr.Virendra Jain,

It's of no use being empanelled in debate, neither you can make a point nor any outcome can be there - only hear the 'barking' of others.

Your valid point was appreciated by me but Arnab always wants to draw out his own theme to extract answers. He is greatest. I've no second opinion of him. Last two days TMC has not come, tho' Derek scouting elsewhere.

Were you in a position to put that delisted co's fraud is nearly or more than a trillion rupees!? Where are those 2/2.5K co's?

Is MCA a sleeping giant?

As per 2004 amended act, the non compliance responsibility on delisting rests with not only compliance officers [CS] but also with directors & promoters, the fines / penalties can be up to 25CR, further if convicted by SEBI or the stock exchange imprisonment up to 10 yrs!

So, a simple explanation, one trillion evaporated, none of those thousands could be traced, SO WHAT? Nothing!

As per modified electricity Act of 2003, if you do not get electrical power for one hour, the service provider be it SEC has to compensate you Rs 50/- per hr!
What happens?

Absolving her Govt. & members of any wrong doing thereby blaming the center she has raised taxes on tobacco products, further asking to consume more, forget what doctors say.

Her idiotic aspect will result into rampant smuggling of the products from the neighbouring states.

Irrespective, why tax the taxpayers to bail out swindlers?

No Virendra, you don't understand they are doing it for the poor hapless, helpless & see that no one suffers with this 500CR balm of the 20KCR amount lost by [investors] sufferers!?

What do you make of the three letters as read out?

Was Lord Meghnad not upright like me stating this is a 'zero sum game'?

I've to per se draw respected Mr. Vinod Kothari, in this dialogue, simply asking him the CSE fraud of 2001. What did MCA or any other agencies do?

A JPC was [similar to today's 2G, etc] probing into it - the culprit was 'software bug' which extended the brokers financial risk w/o margins. Fine, then why brokerages from Bombay traded max in CSE?


Vinay Joshi

In Reply to V K JAIN 4 years ago

Dear Mr.Virendra,

Had Mr.Vinod Kothari, who professes to be financial an expert would never ever had commented & put up the write up w/o MCA & in generality it was info. Read my post to him. [Neither Ms.Sucheta was wrong to post the aspects, more talented she is. She has to delve with an array of wide spectrum & her opionation always unquestioned. ]

Mr.Virendra, Mr. Vinod, financial an expert does not have in his ambit IT, neither does he seeks data to comment instead of focusing on MCA, wherein he may have not known the regulations.

Today the vanishing cos list may not even be 70/80 with MCA nor the duped amount available with the bourses & list of cos.

Mr.Vinod talks about MCA!? When Chit fund Association states that they have 30KCR AUM’s, MCA does not have a list of all cos with tally to claim. Saradha is unlisted!

However my point is where do we catch the fraudsters? Everything evaporated!

As are the bourses w/o any info? MCA accepts out of hundreds or thousands only 40 vanished, then WHAT ARE THEY DOING WITH THE OTHERS? I think Mr.Vinod will be in a better position to answer.

Mr.Virendra, when Sahara is reprimanded by the apex court [hope you’ve read my earlier posts on the subject] & Saradha is state subject what can be talked?

That is the reason I profess FSLRC to be implemented w/o fuss, get grass root people in the ambit of banking, Nilekani’s AADHAR is another a scam as there is a tussle between two ministries. My respected Nilekani is drawing flak, he should straight resign.


Vinod Kothari

4 years ago

Happy to see readers' comments, but there are some important points I would like to highlight. First, this particular case has been blown up due to political connections. However, my subject matter is politicking here. My subject matter is the loss of money of hundreds of thousands. None of them will get to read either this article or these comments, as many of them cannot even read - let alone being net savvy. The investors in these schemes are maid servants, day workers, widows, the elderly and so on. They have burnt their life savings.

What are are forgetting is that Sharada is one case that has been blown up. Is that the only one? No, there are hundred such companies, some of them were picking up monthly collections till last week. Do all of them have political connections? That is hard to believe. Political nexus has given a different shade to the episode. The real issue is that annual filings with the MCA clearly show issue of preference shares, debentures, or current liabilities, piling up in companies with very little capital. Isn't that enough of a trigger to cause an inspection? I have reasons to believe that some of these companies have even been inspected, and got a clean chit as well.

So, as for bolting of stable door - many doors are yet to be bolted. If the system acts in good time, lot of money can still be saved from being burnt.


Vinay Joshi

In Reply to Vinod Kothari 4 years ago

Dear Mr. Vinod Kothari,

In true spirit you have put up as a professional with your financial expertise.

If you’re a professional & financial an expert i hereby request you to answer this post.

Why you didn’t answer my earlier post. YOU WERE HAPPY WITH THE COMMENTS!? I’ll answer Mr. V.K Jain later.

Do you know Mr.Harshad Mehta was to be made an ‘Economic Minister’!? Several people were involved in the scam. Read the relevant books to understand it.

Now you’re taking a position as ‘political fall out’, INSTEAD OF STICKING TO FINANCIAL - SCAM ANALYSIS!?

FYI, no scheme can start w/o backing. The people involved are fronts. How sad you can’t get it!?
[was it not explicit in my earlier post?]

If as per your say Saradha is blown up THEN what you have to state on SAHARA ?
You’re financial an expert.

The Saradha ‘CHITGATE’, can be whooping 20KCR by conservative estimates.

Mr.Vinod Kothari, what has MCA to do with B/S filing? As financial an expert you profess they should venture into the business domain! Is this your financial expertise?
In which manner? Don’t profess wrong things to your students!

Neither Harshad Mehta nor 2G or ‘Coalgate’, would have happened? As you say i’m also not getting in between scams. Mr. Vinod Kothari, issuance of shares is of what relevance?

Fine a co. in debt with 100K times its paid up capital, CAN MCA INITIATE ANY ACTION?
WHY RESIDENTIAL PROPERTIES WORTH OVER 400/700L ARE OWNED BY CO’s WITH a miniscule capital of 100/300K?! ON THE SALE OF THE PREMISES WHAT IS TRANSFERRED? THE CO!? Are you naïve to understand MCA? A financial an expert.

YOU STATE ROC/MCA HAD INSPECTED but fail to state the ambit of inspection & their wrongdoing. Were they struck off?

Re, Saradha I’ve no idea if you know the April 6, explosive letter written by Sen to CBI.

However Mr.Vinod Kothari, with due respect to you, as financial an expert you should have enumerated how to avoid institutional scams which hurts in real time.

Yes I agree with you that gullible can’t read. What can central regulations do when state regulations fail? How? Banning all is easy, what outcome?

As a financial an expert do you have estimate/guesstimate of non banking channels the depositors use?

The Chit fund association claims/ estimates that registered funds have 30KCR & unregistered can be 30 trillion. Total bank deposits may amount 15 odd trillion.
However the poor are credit worthy as per micro-finance, their interest rate should also reduce.

You should have opened a dialogue stating that when ‘money seeks financial products’, the substrata of lower income group can’t access it. [FSLRC financial inclusion & my narration earlier post – hardly 50% Americans are banking.]

So as a financial an expert you should understand that when there’s money at the bottom of the pyramid the wolves will be around in the concrete jungle with maze of laws.

Today AMFI proudly states that in the last decade & a half or so, investors protected.
[I’m not eulogizing AMFI in respect of returns, major funds have performed no doubt.]


Ubaldo C DSouza

4 years ago

If those who are concerned about this are doing nothing about it, some treasuries are being replenished with these funds, ripe for looting. And as Vaibhav Dhoka says, the "blessings" of the politicians, police and who-have-you have not been effectively and sufficiently distributed. The stable will be locked after the horse has bolted! And it seems those in authority and governance are adopting the creed "if you can't beat them, join them."

Vinay Joshi

4 years ago

Mr. Vinod Kothari,

As a financial an expert bring out a 'white paper', publish it in the media & 'openly take position', to nail the culprits & laxity of the state governments in regulations.

This eve, 23rd, conclave hosted by CRISIL & S&P, Dy.Guv,RBI, K.C Chakravarty, was talking on confusion 'in financial inclusion'; narrated all the aspects with a question answer session.

Yes there has been sufficient progress, much has to be achieved, i admit.

In US 25% of the people do not have bank a/cs, high costs deters another 20%.

So our gullible people fall in the trap of conman promises of all sorts.

Sahara is only money laundering.
Forget it.

Saradha aspects are clear cut indications. Bill was to be modified, CM spoke on Sunday 21st, to the Prez, asking the earlier bill to be sent back in 24hrs!? [CAN THE CM SPEAK IN SUCH A MANNER?!]

Kunal Ghosh, MP, executive editor of the Saradha print publications, denies any wrong doing.

If so return the money instead of the CM stating 'what has gone, is gone'.!?

The deposit seeking co's flourished in the last twenty two months. [in WB]

What about WB govt.agencies being openly defrauded by deposit authorization scams?

Mr. Vinod Kothari, i've no idea about your financial expertise & reading but make it known & make no mistake in understanding that no scam can be perpetrated w/o the blessings of the higher ups.

With your financial expertise why don't you decipher 'Sahara', scam?

Dear Mr. Vinod Kothari, this is in no way intended to disparage you whatsoever [do not have the slightest feeling about it.]In fact you've given valued inputs.

Before signing off, i state that your write up put by ML is true & worthy a debate,appreciated, insight of certain aspects but not nailing the flaws for hanging.

Ms.Sucheta has always highlighted con aspects.



4 years ago


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