SFIO is probing 67 companies for running Ponzi or money circulation schemes. In addition, the government has received complaints of financial fraud against 154 companies including Saradha, Rose Valley group, Vaishnavi Corporate Communication, Speak Asia, Reebok India and Alchemist Infra
Serious Fraud Investigation Office (SFIO) is probing 67 companies for allegedly running Ponzi or money circulation schemes. Corporate Affairs Minister Sachin Pilot said his ministry has ordered SFIO to conduct probe against 67 companies who had allegedly floated Ponzi or multi-level marketing (MLM) schemes.
"...Investigation is being conducted in respect of all of them. As and when the investigation is completed, government orders prosecution in respect of violations of the provisions of the Companies Act, 1956 and Indian Penal Code, 1860," Pilot said in a written reply to the Rajya Sabha.
Ponzi or MLM schemes are fraudulent investment operations, which lure investors with promise of high returns.
Pilot also said the government is looking into complaints of financial frauds against 154 companies including those connected with Saradha Group and Rose Valley Group.
"Complaints have been received against 154 companies/ organisations during the last three years," he said, adding that his ministry has ordered probe of the balance sheets and other documents in these cases.
"Some cases have been referred to the Economic Offences Wing (EoW) of the concerned state government for further investigation," he added.
As per the list provided by the Minister, complaints of financial fraud have been received against Saradha Group's 10 entities such as Saradha Realty, Saradha Agro Development, Saradha Exports and Saradha Garden Resorts & Hotel.
Besides, the list includes names of 14 entities related to Rose Valley Group including Rose Valley Industries, Rose Valley Marketing and Rose Valley Hotels and Entertainment.
Vaishnavi Corporate Communication, Speak Asia, Reebok India, Alchemist Infra are among the other companies against whom complaints have been received, according to the list.
On steps initiated by the government to detect corporate wrongdoings, Pilot said the ministry is in the process of developing an early warning system to identify cases of frauds or potential frauds at the earliest.
"Pilot testing of the system is expected to be completed during 2013-14," the Minister said.
In addition, Pilot said various measures had been undertaken to protect the investor' interests through programmes on awareness and education.
Some of these steps include issue of multi-lingual print media advertisements from time to time to caution the investors about fraudulent investment schemes, creation of facility on MCA-21 website for lodging complaints and for tracking their status and a system of sending SMSes cautioning investors to be careful while making investments.
The management, however, acknowledged that currency and its fertiliser business have been impacted, coupled with plant stoppages and higher energy prices
Tata Chemicals Ltd reported standalone net profit of Rs100.43 crore, for the April-June period, compared with Rs68.13 crore same period last year, on robust sales and stable realisations in the consumer business segment. However, the Tata Group company’s fertilisers and agri-business were affected. During the June quarter, Tata Chemical said its total revenues increased Rs1,738.64 crore from Rs1,586.34 a year ago period.
R Mukundan, managing director, Tata Chemicals said, “(During the quarter) Fertilisers and agri-business had an adverse impact of foreign exchange volatility and raw material shortages. International entities are challenged with issues of softening demand, lower realisations, plant stoppages and increasing energy prices.”
The company’s global chemical performance was impacted due to softening demand, lower realisations and plant stoppages. Haldia production suffered due to non-availability of phosphoric acid during the quarter. Tata Salt sales is up 3.4% while the company is the market leader with 65.2% market share in the national branded salt segment.
The company repaid $95 million in June 2013 as part of the ECB-$475 million loan pay off.
The company’s urea production is inline with expectation, with higher urea imports during the quarter. Despite lower urea prices, the weak Indian rupee cancelled the gains. The DAP/NPK was impacted due to ambiguity on the subsidies and raw material stoppages. Neem coated urea accounted for 35.7% of the total urea production. The officials are, however, playing the watch and watch game.
“We remain cautious on global demand scenario going forward domestically as well as internationally and while prices may remain at the same levels margins remains under pressure. Subsidy outstanding has come down as compared to March 2013 levels, but will continue to remain a challenge in the balance portion of the year,” Mukundan added.
Tata Chemicals closed Monday 2.3% down at Rs258.8 on the BSE while the benchmark Sensex ended marginally higher at 19,182.
HSBC Markit’s India PMI index, which measures manufacturing and services performance, has slipped to its lowest level since April 2009, with Nomura expecting India GDP growth rate to slip below 5%
Hopes for economic recovery are likely to be dashed, if the Purchasing Manager’s Index (PMI) is anything to go by. It is not just manufacturing and agriculture that is getting affected but services too. According to the latest data, HSBC Markit PMI index, services sector PMI declined to 49.3 in July, its lowest since April 2009, from 51.5 in June. The output index sharply declined to 47.9 in July from 51.7 in June, while the new orders index fell to 47.8 in July from 51.9. Both the input and output price indices moderated, suggesting that weak demand is also constraining pricing power in the services sector.
In a report, Nomura Financial Advisory and Securities (India) Pvt Ltd said, “In our view, the weakness in manufacturing appears to be spilling over into the services sector and this is likely to continue this year. We expect banking/financial services and the trade/transportation output growth to weaken. Hence, despite better agriculture growth, we expect GDP growth to remain weak at a below-consensus 5.0% y-o-y in FY14, the same as in FY13, due to slower non-agriculture growth. We expect policy rates to remain on hold in FY14, followed by 75bp of cumulative repo rate cuts in FY15.”
Commenting on the India Services PMI survey, Leif Eskesen, chief economist for India & ASEAN at HSBC said, “Activity in the service sector contracted in July led by a drop in new business, which also led to a decline in optimism among the surveyed companies. Meanwhile, inflation gauges softened on the back of weaker demand and tough competition. While the RBI has to cater to the currency at the moment, it will eventually need to cater more to growth as economic activity continues to soften.”
Manufacturers and service providers both recorded lower output levels, amid evidence of falling new business and a difficult economic climate. “Down from 51.7 in June to 47.9 in July, the seasonally adjusted HSBC Services Business Activity Index registered below the 50.0 no-change mark for the first time since October 2011 and was consistent with a moderate contraction,” said the report from HSBC India Services PMI.
Inflation, especially food inflation, continues to be a pressing concern for policy makers, politicians and bureaucrats, with elections less than a year away. However, Reserve Bank of India (RBI) has mostly turned a blind eye towards it and has been pushing for a growth-oriented policy. However, it is pertinent to note that inflation isn’t just affecting the poor, but also the services sector. HSBC notes: “Input cost inflation across the private sector economy picked up to the sharpest in five months. Where input costs rose, service providers reported higher prices paid for fuel, labour and raw materials.”
Other reasons for poor output are incessant power cuts and raw material shortages at suppliers. The agriculture sector over the last few years have been grappling with erratic monsoons, poor power supply in villages, which has affected their supply. The power sector has been in doldrums for the past few years, which has stymied the manufacturing sector.
Yet, even the financial sector is not immune. Nomura has warned that banking and financial services growth rate as well as trade output is likely to be weaker, and expects GDP growth rate to dip below 5% by 2014 fiscal. However, they have retained some sense of optimism by expecting interest rate of75 basis points in 2015.
The potent combination of inflation, poor manufacturing, services and agriculture has made many analysts and investors jittery. The continued volatility in the market has thrown the seeds of caution into the wind.
Refer to our cover story on what investors can expect ahead over here (Turbulence ahead for equity, bonds and gold!)