ML sectoral trends

Shares of shipping companies and refinery companies advanced 3% each, while shares of garments companies and paints companies declined 6% each. Stocks of automobiles companies, consumer products companies and petrochemicals companies rose 2% each. Stocks of airlines companies declined 4%.

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Urban Inflation

Combined inflation for urban and rural areas increased marginally, to 5.01% in May 2015, from 4.87%% in April. Inflation in urban areas increased to 4.41% in May from 4.36% in April. Food inflation in urban areas declined to 5.08% in May from 5.41% in April. In urban areas, inflation of vegetables declined to 6.77% year-on-year. Inflation related to fuel & power remained steady at 3.42% in May. Inflation for housing, too, steadied at 4.64%. Inflation for clothing declined to 4.65% from 4.84%; for miscellaneous items, it increased to 3.13% in May from 2.51% in April.

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Datson's Lab: Orphaned Investors; Unscrupulous Promoters
Datson’s Lab has no promoter. Was it running a money-laundering operation?
 
A few weeks ago, an investor wrote to say that the two national exchanges were suspending the shares of Dr Datson's Lab, a little known pharma company, on 22nd May. Our investor said that the company’s promoters had pledged their entire shareholding which was invoked by the lenders leaving it orphaned. Other lenders had moved court and the official liquidator had taken possession of the company and its registered office on 30 April 2015. A month later, the stock exchanges suspended trading in the company, although its shares continued to be manipulated right until 23 April 2015, when they had shot up 183%, to Rs17.  
 
A simple Google search reveals a shocking saga of how companies are listed, subscribed to by ‘foreign investors’ and their stock prices manipulated right under the nose of the capital market regulator and stock exchanges. In fact, Dr Datson’s Labs seems to have been just a large money laundering operation. And, yet, like the dubious Satyam Computers, it won a series of awards for corporate governance, innovation, transformation and leadership all the way until its eventual collapse in 2015. 
 
But, unlike Satyam, even a simple reading of its corporate history suggests complicity of regulators and listing department officials in allowing the company to exist. Dr Datson’s Labs started operations in 2006, incorporated as a private company called Aanjaneya Biotech which later became Aanjenaya Lifecare. It claimed to be making salts of quinine, a second-generation anti-malarial. Aanjaneya Lifecare’s promoters are listed; these are: Aasda Life Care Limited and Dr Kannan K Vishwanath. In 2009, Aanjaneya Lifecare became a wholly-owned subsidiary of Aasda Life Care Limited. 
 
Over time, the company kept issuing shares to the promoters, until Aanjaneya ceased to be a wholly-owned subsidiary. It then decided to make an initial public offering (IPO) in 2010; the issue was managed by Anand Rathi Advisors and IDBI Capital Markets. A series of stunning disclosures in its red-herring prospectus were a declaration of its shady intentions, but it was still listed on the BSE and the NSE. 
 
The risk factors in the prospectus bluntly stated the following: that the object for which funds were being raised had ‘not been appraised by any bank or financial institution’ and their deployment is ‘entirely at our discretion’. No plant or machinery was ordered, and, at the time of going public, it had negative cash flows for the prior four years at least. Several statutory reporting requirements were not complied with and could lead to penalties. Certain statutory licences and approvals may have expired or were pending approval; many trademarks were not registered and remained with its promoter Dr Kannan Vishwanath who also owned the registered office.  It had not appointed a company secretary as required by law and had not even applied for permission to manufacture certain products. While it claimed to have acquired the assets of a company called Prophyla Biologicals (Pune), the sale deed was not executed. 
 
More stunning was the admission that it could not even undertake any new activity without the permission of its bankers, viz., State Bank of India and Shamrao Vithal Bank. It also had unsecured loans of Rs10 crore from its directors. This meant that the IPO funds would be used to repay its bankers and directors. 
 
Now let’s look at the equally shady antecedents of Dr Datson’s ‘corporate promoter’ Aasda Lifecare, which was originally Finaventure Capital Ltd. In 2010, its name change failed the listing rules and was disallowed. How and why was it cleared later? And why did Aanjeneya Life Care not come in for greater scrutiny when it was listed in 2010? All this requires a full-fledged investigation. Well-known market expert Ambareesh Baliga says that the name change to Dr Datson’s Labs happened in June 2013 when its share price dropped sharply from over Rs800 to Rs60. It was probably a ruse to ensnare a new set of gullible investors. 
 
Despite this shady background, Anjaneya Lifecare attracted foreign institutional investors (FIIs) such as Davos International Fund, Leman Diversified Fund, Sparrow Asia Diversified Opportunities Fund, Stream Value Fund, Kuvera Fund and Auctor Investments. They held 56.79% of the equity in March 2014; but their shareholding has dwindled to 2.20% in March 2015. 
 
It also issued foreign currency convertible bonds (FCCBs) in October 2014, a small portion of which got converted into equity at Rs14.25 per share in January 2015. The entire shareholding of promoter, Dr Kannnan Vishwanath, was pledged and invoked by lenders leaving the company virtually orphaned. Key directors, including the compliance officer, have also quit. Will the management get away with this and bide their time until they can revive the company and con investors again? A simple reading would suggest that this is nothing but a money-laundering operation, fit to be investigated by the ED (enforcement directorate), income-tax department, SEBI and RBI. Will they? 

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COMMENTS

Rupesh Gupta

9 months ago

Dear Ms. Sucheta,

There is another company Secunderabad Healthcare whose shares are trading at 1.74 whereas its bookvalue is surprisingly at 20. The promoters hold no equity but surprisingly many top financial corporates are the major shareholders who have acquired these shares in company's IPO at a premium of Rs.8 few years ago while company has no business since many years and only showing meagre profit/loss on nominal turnover just for formalities. Can you please check it and advise what is the story of this company.

Rupesh Gupta

9 months ago

Dear Ms. Sucheta,

Its so sad to know about day-light robbery committed by such companies in the wail of Company law and retail investors failing to anticipate as our Watchdog SEBI is not doing enough to curb such promoters.

I used to invest in IPOs 20 years back but then realised how so many fraud companies with window-dressed Balance-sheets and Prospects siphoned investor money and eloped. Thereafter I started investing through MF rout only as they have a team of experts to avoid such frauds and its easy to get in and get out as firstly you are not emotionally attached to any stock and secondly there is no problem of liquidity which you may find in case of low volume stocks.

I have a personal query about Amtek group and particularly about Castex as I am holding its shares since IPO around 20 years ago and have been receiving dividends regularly for so many years hence never thought of selling its shares. The company was making huge profits and everything was OK till 2014, however, since 2015 the Company is reporting losses due to high loans for aggressive takeovers of various businesses globally. Its price shot to 360 from 60 in very short span and came back to 6 now. Please check and advise fundamentals of this company and its managements. Is it a case of promoters chickening out after defrauding the public or a combination of aggressive leveraged expansion hit by low business cycle resulting into panic selling.

Ritesh

11 months ago

This company have not even paid to suppliers for raw materials to the factory....

Infact we were suppliers to Prophylla at Pune which Dr.Kannan bought over and we became suppliers to AAnjanya lifecare and later Dr.Datson ...

We never had any problem with prophylla but with AAnjanya getting payment of material supplied to factory became impossible. One Mr.Paresh Shah of Purchase Department made all False promise and commitments to suppliers of Prophylla to buy material and left...!!!!!

Ritesh

11 months ago

This company have not even paid to suppliers for raw materials to the factory....

Infact we were suppliers to Prophylla at Pune which Dr.Kannan bought over and we became suppliers to AAnjanya lifecare and later Dr.Datson ...

We never had any problem with prophylla but with AAnjanya getting payment of material supplied to factory became impossible. One Mr.Paresh Shah of Purchase Department made all False promise and commitments to suppliers of Prophylla to buy material and left...!!!!!

Bapoo Malcolm

1 year ago

There can be no legislation against human greed. There is a sucker born every minute. The slogan applies in advertising and for those who claim to "be in finance".

There is no such thing as a quick buck just as there is no such thing as a free lunch. My father-in-law used to say that "What is free is always very expensive". In other words, hard work pays, nothing else.

Dream, by all means, but not too big. TAKE CARE. All that glitters is not gold. Save first and spend the rest. Spend after you have earned, in cash and not on paper. And keep your eyes and ears open. In short, listen to Moneylife.

Bapoo M. Malcolm

REPLY

Shirish Sadanand Shanbhag

In Reply to Bapoo Malcolm 1 year ago

Respected Adv Bapoo, your thoughts are beacon light to every younger ones to follow it.

mahavir hingad

1 year ago

U didnot put the main crux of the scam in ur article. The promoters actually brougt FPO (further public offer) indirectly through FCCBs which i understand a loophole in our systems... Otherwise how is it possible that fund house which got FCCB's converted into shares at conversion price of rs. 55 sold them to public below rs 20 again subscribed to second FCCB's of the same company got them converted at price of rs. 14 into shares and sold them again to public at below rs. 10

mahavir hingad

1 year ago

U didnot put the main crux of the scam in ur article. The promoters actually brougt FPO (further public offer) indirectly through FCCBs which i understand a loophole in our systems... Otherwise how is it possible that fund house which got FCCB's converted into shares at conversion price of rs. 55 sold them to public below rs 20 again subscribed to second FCCB's of the same company got them converted at price of rs. 14 into shares and sold them again to public at below rs. 10

Shirish Sadanand Shanbhag

1 year ago

Even when Stock Investment Watch Dog, SEBI is vigilant, still such SCAMs are continued in our country?
To curb such scams, Government Should make a strict vigilance on listed companies, so that such financial scam will not take place in future.

S Hariharan

1 year ago

Simple... only then an undeclared emergency can flourish without any
hindrance.
Let India be governed, democratically or not at all.
There is at news item "Shah strikes a note of caution on Emergency" (Jun 26), and here's a humble introspection. Indeed, weren't there, then, signs of a clear consensus that Emergency was 'scripted jointly' by Indira Gandhi and JayaPrakash Narayan? The country's premier sociologist, Andre Beteille, Historian Bipan Chandra and scholar Ramchandra Guha agreed that the 'anarchy' that JP was promoting and the 'authoritarianism' of Indira and her son, Sanjay, were the 'two sides of the same coin'. Some others asked whether the saintly JP was justified in 'inciting' the armed forces and the police to disobey the government of the day. When the hammer-blow actually fell, there was dead silence. No wonder, Indira told a confidant: 'Not a dog barked.' While then BJP was calling 'Maunvrat Singh' days as an emergency, now Cong is making same potshots against 'MaunMuni' Modi! Now too, are there bold dogs to bark?
True, reasons are quoted for the changing view of the Emergency today. A very important one is that much more than half the country's population was born after 1975. It knows little about the Emergency and cares even less. Moreover, today NDA with more scams than were there with UPA, aren't we realising that even a Modi government can't be doing the promised 'terrible things' without a formal proclamation of the Emergency or an unclaimed one?
Not only the margadarshan mandal of BJP; Even Amit "Shah strikes a note of caution on Emergency" says the4 news item today! The material fact still holds good that if Indira Gandhi's Emergency proved anything at all, it established that India would be governed, to the extent it can be governed, democratically or not at all.

ASAD MAHADI

1 year ago

Great work.

Why can not Moneylife lists are such possible dubious entities?

Bapoo Malcolm

1 year ago

WOW!

Bapoo Malcolm

1 year ago

WOW!

RAJENDRRAN S

1 year ago

certainly it is cheating.
SEBI/NSE/BSE/RBI/I T Dep./ Enforcement should enquire all aspects of this issue.

Hemlata Mohan

1 year ago

Dear Ms Dalal, I know it is impossible for you to ascertain the credentials of all such companies. However, is it possible that you start a separate column or website to sensitize investors about the risks in such entities as and when you come across them in the prospectuses? Of course, please do not do this for free - please charge - atleast people who are careful about their money will not invest in such dubious deals . In short, I'm asking you to do the work of Sebi which should be dismantled forthwith- it has become a parking lot for many. Ever since you blew the whistle in the Harshad Mehta scandal, I have been following your writings. In fact we now have a saviour only in persons like you

REPLY

Sucheta Dalal

In Reply to Hemlata Mohan 1 year ago

Dear Ms Mohan

We actually do better than that... we run regular financial literacy sessions at Moneylife Foundation at not-for-profit initiative.

Please join Moneylife and attend our seminars. One of the things we say is that 90% of the financial products pitched at you are useless and maybe downright harmful.
If you are a Moneylifer, you would not even look at such companies. So, in conclusion, no we would not be able to track and report and thousands of ponzis, MLMs, and shady IPOs that hit the market.
We can guide people on how to choose what is good for a long term saver and we are doing that.
Please check out the helplines and links that are right on this page . Or click here https://http://www.moneylife.in/events/MLFoundation_eve...

best

A S Bhat

1 year ago

Any idea on the present status of this character Kannan Vishvanath? I am sure he must be somewhere abroad laughing all the way to the banks?

Surely a common man does not read the prospectus and SEBI allows such dubious IPOs. But how do the banks allow raising of equity to repay their loans without there being a concrete plan? Do the banks work in this fashion?

A S Bhat

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