Mutual Funds
Union KBC’s Dynamic Bond Fund

Will this scheme be more dynamic than others?

After IDBI Mutual Fund, Union KBC has also filed offer document with Securities and Exchange Board of India (SEBI) to launch Union KBC Dynamic Bond Fund, an open ended debt scheme. As we said earlier a dynamic bond fund, as the name suggests, is designed to give the fund manager the flexibility to change the duration of the bond as and when needed. Interest rates and bond prices are inversely related. When the interest rate is rising, bond prices fall and the fund manager should be able to decrease the duration of the bond; short-term bonds face a lower impact. In addition, when the interest rate is falling they should be able to increase the duration of the bond.

The other flexibility is to move into cash and sit on the sidelines when the interest rate is rising sharply over different horizons. Dynamic bond funds would dynamically move from a fully invested situation to a fully cash position and various stages in between, depending on the fund manager’s reading of the interest rate situation. The idea of dynamic bond funds has by and large proved to be good only on paper. We studied eight of them and their returns since inception do not seem great.

The Union KBC will invest 100% of assets in debt instruments including government securities and corporate debt with medium risk profile and money market instruments with low risk profile. Investments in securitized debt including Pass Through Certificates (PTCs) not to exceed 25% of the net assets of the Scheme as at the time of purchase. The benchmark index is CRISIL Composite Bond Fund Index


Times Private Treaties buys Karuturi stake by paying 380% premium

The media company's infamous 'ads-for-equity' unit bought stake at huge premium in Karuturi Global, a company that is on a free fall with its shares trading 88% below since recent high in October last year

Bennett, Coleman & Co (BCCL), the media group that owns assets like the Times of India, radio and TV channels besides various magazines and online portals, has done a new stake purchase, again at an inflated value. BCCL's unit Times Private Treaties or Brand Capital, as it is now known, has bought 0.4% stake in so-called food processing and rose-growing company Karuturi Global at Rs21.6 per share against its week-to-date average price of Rs4.50 a share, huge premium of 380%.

Brand Capital paid Rs7.51 crore for buying 34.7 lakh shares of Karuturi that based on the average price are valued at just Rs1.56 crore! Incidentally, Karuturi shares are also on a free fall since the past 13 months. Since October last year, (the shares closed at Rs38.15 on 21 October 2010) Karuturi shares have tumbled 88% to Rs4.70 per share as on 17 November 2011.

Earlier this year, three private funds, Emerging India Focus, India Focus Cardinal and Elara India Opportunities, together converted their warrants into equity.
These funds bought the warrants in 2009 for Rs12 per piece and post-conversion hold 22.8% stake in Karuturi. They also seem to have lost about 60% value of their investment. As of September end, 11 investors under the category ‘public and holding more than 1% of the total number of shares’ have 48.34% stake in Karuturi, while the promoters hold 18.15% shares.

During the quarter to end-September, Karuturi said its profit more than halved to Rs17.79 crore from Rs42.61 crore in the same period last year. During the second quarter, Karuturi Global’s total revenues also fell to Rs133.73 crore from Rs151.08 crore a year ago.

Bengaluru-based Karuturi Global is reportedly the world’s largest rose exporter and is engaged into floriculture, processing foods and information technology (IT) business as well. Its operations are claimed to be spread in about 15 countries including India, Ethiopia and Kenya. With an area of over 292 hectares under Greenhouse cultivation, Karuturi annually produces around 555 million stems of quality cut roses, essentially for exports to high-value markets. At least that’s what the claim is.

According to a blog posting, Karuturi bought large portions of land in Ethiopia, a country that still suffers from hunger and is dependent on foreign food support. “The contracts between companies like the Karuturi Global and the Ethiopian government are kept secret. The local farmers are abandoned from their land as it is not privately owned but belongs to the government of Ethiopia. Companies like Karuturi expand and profit from this situation on the back of the local farmers and community management. Land is leased cheaply, machines and equipment is imported without customs and the crops are exported,” the blog said. However, there are whispers in Mumbai market circles that many of Karuturi’s claims are suspect.

Coming back to BCCL and Brand Capital, according to Wikipedia, Times Private Treaties is a barter program in which advertisement space is bartered for equity stakes in new and established companies. This has been an extremely controversial trend started by the Times Group, as it breaches the sanctity of the media. Times Treaties is known for acquiring large stakes at inflated valuations in return for advertising space and articles, which appear as news items. In 2010, Times Private Treaties was relaunched as 'Brand Capital', which, according to the company, reflects its value proposition better.

Currently, Times Private Treaties, BCCL’s private equity arm, has stakes in over 135 companies including Lavasa Corporation, Gujarat NRE Coke, Gini & Jony, Micro Technologies, Refeel Cartridge Engineering, Thyrocare and Raj Oil Mills.



Ramesh B

5 years ago

Great!Times group by such tactics does lot of harm to investors/readers.Last year, in an article in EcoTimes, they expressed posative views "Resurgere Mines "shares.It was 76Rs.then. At present, it is 0.30rs.though sub-devided and x-bonus.But it is clear that after publishing the article,the groups off-loaded the share and innocent invested faced the hell!!!

Award winning Sahayata Microfinance is the latest to go astray

Charges of serious misreporting and mismanagement again surfaced in the Indian micro-finance. The question is how could a company like Sahayata Microfinance, which was darling of so many investors, lenders and stakeholders go astray

I came across a very interesting news item in a newspaper today:

“Sahayata Microfinance Pvt Ltd has suspended the brass, including its chief executive, on charges of mismanagement. The Rajasthan-based microfinance company has also stopped fresh lending temporarily, to set its house in order. Following the suspension of management and poor performance, rating agency CARE downgraded its non-convertible debentures of Rs 19.5 crore from CARE BB+ to CARE B-. In September some board members pointed out prima facie evidence of the management’s misrepresentation of company performance. The board has ordered a detailed portfolio audit. The investors have placed an interim -management to control operations, to ensure the business continues uninterrupted. The company will resume loan disbursement from December. The board questioned chief executive, chief financial officer and other senior managers on charges of serious misreporting and mismanagement. ... While chief executive was suspended with immediate effect, the CFO and head of operations were stripped of their duties immediately. They were subsequently suspended.” (Business Standard, November 18, 2011,  )

“Sahayata commenced operations as a society in September 2006 in Udaipur (Rajasthan); the promoters came together with their own investments to test the viability of the business in Rajasthan. In August 2007, the promoters acquired a non-banking finance company named Shree Hari Fintrade Pvt Ltd. In August 2009, the company got its present name. Sahayata’s assets under management amounted to Rs.800 million during mid-October 2011 compared to Rs.1260 million as on March 31, 2011”.  (India, November 9, 2011, ). The Mix Market website lists the growth of Sahayata’s loan gross loan portfolio and clients as follows:

Moneylife readers would recall that the “Udaipur-based Sahayata Microfinance recently raised Rs19.5 crore through the issuance of non-convertible debentures (NCDs), which have now been purchased by DWM (Cyprus) Ltd, a member of the Developing World Markets group of companies. The NCDs are listed on the Bombay Stock Exchange and have been fully subscribed. IFMR Capital was the sole financial advisor to the issue. The transaction allows the company access newer funding sources, which will support the low-income households that Sahayata serves across India.” (Microfinance Focus, April 23, 2011, )

Commenting on the issue of NCDs by Sahayata, a posting on the IFMR blog, April 13th (2011) notes that,

“This transaction is significant not only because it is the first time that Sahayata has raised funds through listed bonds, but also because this transaction allows the company access to newer funding sources, which will be a robust support system for the low-income households that Sahayata serves across India.

Congratulating Sahayata and IFMR Capital, Jim Kaddaras, Partner for Debt, Structuring and Legal Affairs at DWM, said, ‘We are delighted to have brought financing to Sahayata, in order to support thousands of low-income entrepreneurs across India. At a time of uncertainty in the Indian microfinance sector, DWM is committed to financing socially committed MFIs with strong management teams like Sahayata. We hope to provide further financing to the sector in FY2012.’

Vineet Sukumar, Head Origination and Treasury at IFMR Capital said, ‘This transaction is yet another milestone in IFMR Capital’s efforts to provide high quality originators access to debt capital markets. We are delighted that Sahayata Microfinance, a long standing partner and a participant in all multi-originator securitisations structured by IFMR Capital, has availed of funding from rated, listed instruments that enhance transparency for the company and the sector, and pave the way for alternative and sustainable funding sources’”. (IFMR Blog, April 13th 2011, )

Ok, so much for the recent fund raising efforts by Sahayata. What is really interesting is that Sahayata has won several awards and recognitions (national and international) for its good governance, innovative practices and the like:

  •  First, it must also be mentioned that “Sahayata Microfinance Pvt Ltd. has won the prestigious award for Commitment to Improved Implementation of Good Governance. This international award has been conferred by Hanson Wade, an organization providing invaluable insights to businesses globally, in association with Symbiotics Research & Advisory, Gradatim IT Ventures, IBM and International Finance Corporation (IFC). The Company was selected out of 80 nominees which included renowned MFIs and Investments Funds from India and across the world. The honour was given out at a glittering ceremony on 27th October, 2010 at Washington in USA.” (
  •  Second, Sahayata Microfinance Pvt. Ltd, also “received the The Srijan 2009 Emerging MFI Award . The award presented today at Srijan 2009 Microfinance Forum hosted by Intellecap & Standard Chartered Bank at Hyatt Regency in Mumbai. The Srijan 2009 Emerging MFI Award recognizes MFIs that largely catering to the poor – urban or rural, Creation of social value , Innovative practices,  Methodologies that have helped scaling up of the institution, Institutional vision that goes beyond pure micro-lending to create wider impact and larger social returns and Client-centric approaches and methodologies”. (Microfinance Focus, Dec. 08, 2009, )
  •  Third, apart from these prestigious awards, Sahayata’s website states that it is also a member of ‘The Smart Campaign’.  “The Smart Campaign, a global initiative to incorporate strong client protection principles across the microfinance industry, today recognized Sahayata Microfinance Private Limited (Sahayata) for its outstanding efforts to train both staff and clients on institutional standards of ethical behavior. Sahayata’s training document, ‘Illustrations and Activities for Training Loan Officers on Customers’ Rights and Responsibilities,’ is now available as a ‘good practice’ example on the Smart Campaign website. … ‘Sahayata was selected as a winner because their practical tool is easy to create, use, and understand,’ said Smart Campaign Tool Development Specialist Leah Wardle. The Smart Campaign’s Client Protection Principles state that MFIs must maintain high ethical standards in their interactions with microfinance clients and ensure that adequate safeguards are in place to detect and correct corruption or mistreatment of clients. Sahayata’s ‘Illustrations and Activities for Training Loan Officers on Customers’ Rights and Responsibilities’ can help MFIs design their own tools to help them achieve this.  Available in both English and Spanish, this tool is one of many available on the Smart Campaign’s website, (Washington, DC, June 2, 2011, )   

Having seen this galaxy of awards and recognitions and also given the recent happenings with regard to misrepresentation of results and subsequent sacking of the CEO and other senior management, I was naturally curious to know about the investors in, lenders to and auditors of Sahayata:

  • As “Sahayata’s web site states, the value creation ability of Sahayata is evident in the trust which its investors have placed in it.” According to the website, the main equity investors are: (i) Bellwether Microfinance Fund Pvt Ltd; (ii) India Financial Inclusion Fund; (iii) SIDBI; (iv) Caspian Advisors Private Limited; (v) Microventures Investments SCA SICAR; and (vi) Microventures SPA” (     
  •  The website further states that, “Over time, success and effectiveness of Sahayata as a microfinance organisation has been recognised in various pockets of the industry. A reflection of this can be found in the mutually beneficial relationship it enjoys with a number of reputed financial and social institutions in the country. Some of the banks/financial institutions which Sahayata works closely with are: (a) Small Industries Development Bank Of India (SIDBI); (b) HDFC BANK; (c) Axis Bank; (d) YES Bank; (e) Industrial Development Bank of India (IDBI); (f) Punjab National Bank (PNB); (g) Development Credit Bank; (h) Citibank NA; (i) Kotal Mahindra Bank; (j) State Bank of India (SBI); (k) Bank of India; (l) State Bank of Patiala; and (m) Mewar Aanchalik Gramin Bank. The Financial institutions are: (a) Ananya Finance for Inclusive Growth Private Limited; (b) IFMR Capital Finance Private Limited; (c) Fullerton India Credit Co. Ltd.; (d) Mahindra & Mahindra Financial Services Limited; (e) Aditya Birla Finance Ltd.; (f) Maanaveeya Holdings & Investments Private Limited; (g) Reliance Capital Limited; and (h) MAS Financial Services Limited” (
  • Again, as listed in the website, Sahayata’s statutory AUDITORS are Deloitte Haskins & Sells, New Delhi while the Internal Auditors are Nyati Mundra & Co., Udaipur

           That said, given all that has happened several questions remain unanswered:

1.    How could a company that was the darling of so many investors, lenders and stakeholders go astray?
2.    Are there pressures that cause senior management of some MFIs to seriously misrepresent their results and engage in non-transparent practices?
3.    Is it that lending to the poor is unviable and unsustainable due to various factors like risks in livelihoods of low income people, lack of infrastructure, market imperfections and the like? Hence, do special allowances have to be made with regard to financial standards applied to MFIs and similar institutions?  
4.    How did an MFI that won so many awards and recognitions (international, national) come to this level? What due diligence did the award makers do and what does it say about their due diligence?
5.    What were the investors, bankers, credit rating agencies, technical support organizations and stakeholder partners doing even as Sahayata’s senior management went about seriously misrepresenting results as stated in the news item listed earlier? What does it say about their due diligence?
6.    What are the implications for international databases like Mix Market ( that list MFI data on various parameters and well intentioned efforts like Micro-Finance Transparency ( that seek to promote transparency in pricing using self-reported and other data from MFIs?
7.    What are the implications regarding the quality of NBFC MFI regulation and especially, supervision in India? What was the department of non-bank supervision at RBI doing even as Sahayata’s senior management was seriously misrepresenting the results (as stated in the news item? This question becomes even more critical because Sahayata has been registered as an NBFC with RBI since 2007 or thereabouts.
8.    What does all of this mean for Indian micro-finance? Should we not have a complete cleaning of the stables first before talking of revival?
9.    And finally, are these happenings just an aberration or do they reflect a deeper malaise in Indian micro-finance?

As I have been saying for long – for as long as from May 2005 when the NABARD high-level policy conference took place at New Delhi ( – we surely need to determine whether the malaise in Indian micro-finance is deeper than assumed and/or portrayed. Without question, we need to urgently understand whether - just as it happened at the Ramalinga Raju led Satyam Computers - senior management and or others at some MFIs are perhaps the cause of the burgeoning frauds and misrepresentations of performance in Indian micro-finance (Increasing frauds, internal lapses at MFIs: Need to strengthen supervisory arrangements to protect the poor, )  

Thus, given the information available in the public domain, the case of Sahayata must be viewed very seriously and Moneylife would like to caution investors, lenders and all other stakeholders including the Reserve Bank of India that unless there is a thorough study into and proper clean up of the operations in Indian micro-finance, larger micro-finance shocks could be in the offing. Make no mistake about that!


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