Did CRISIL’s ‘independent’ research report give 5/5 grade to Helios & Matheson ignoring the criminal case pending against its chairman, MD?

Rajeev Sawhney, who is fighting a bruising battle with H&M over the takeover of Vmoksha, alleges that the ratings agency did not look into the pending criminal case against the chairman and MD of H&M before assigning its highest rating. How independent is CRISIL’s grading of H&S?

In a bizarre piece of ‘independent’ research, ratings agency CRISIL has assigned Helios & Matheson Information Technology (H&M), an unfancied software company, its highest grading of 5/5. While the selection of H&S from hundreds of excellent companies looks fishy, the agency has overlooked several reports about a criminal case pending against the chairman and managing director of H&M, alleged Rajeev Sawhney, chairman of Vmoksha Technologies Pvt Ltd. Mr Sawhney, a US-based non-resident Indian (NRI) is fighting a bruising battle with H&M over the takeover of Vmoksha.

 

The Reserve Bank of India (RBI), under a Right to Information (RTI) reply to Mr Sawhney, has admitted that its permission was not sought by State Bank of Mauritius while providing a loan facility on personal guarantees of V Ramachandra, chairman and GK Muralikrishna, managing director of H&M. The RBI has already submitted a detailed note to the Enforcement Directorate (ED) in the matter.

 

The ED is conducting investigations against Mr Ramachandran and Mr Muralikrishna for their alleged role in the acquisition of Vmoksha.

 

 

In its reply under the RTI, the central bank while acknowledging the ‘deal’ stated that “...instead of crediting the acquisition proceeds to the account of Vmoksha Technologies maintained with HSBC Bank, the proceeds were credited to the Vmoksha Technologies account with State Bank of Mauritius at its Mauritius branch. It was then observed that this account was purportedly opened in a fraudulent manner by Pawan Kumar, the then CEO and chairman of Vmoksha Technologies with the help of two persons, i.e. chairman and MD of H&M. Pawan Kumar also applied for a loan of $13.5 million with State Bank of Mauritius at Port Louis branch in Mauritius. This loan account was immediately sanctioned by the bank against personal guarantees of two persons i.e. chairman and MD of H&M,” the RBI said.

 

RBI in its note sent to the ED further added that “...the issue relating to State Bank of Mauritius, Port Louis branch sanctioning loan to Vmoksha Technologies Mauritius against personal guarantees of two resident Indians i.e. chairman and MD of H&M, it was advised by the Mumbai branch of State Bank of Mauritius that through inadvertence, RBI’s prior approval for such guarantee was not obtained.”

 

Hire an independent rating?

 

CRISIL has assigned H&M a strong upside from the current market price with highest grading point of 5/5. According to CRISIL, banking, finance and insurance companies (BFSI) and healthcare segment would drive future growth of IT services in India during 2013 and, H&M would get benefits from it as the company works with seven of the 20 largest global banks.

CRISIL said, “The company has a track record of uninterrupted profits for 84 straight quarters and consistent dividend distribution year on year since inception. Strong organic growth momentum has led to double-digit growth sequentially quarter-on-quarter and a 42% topline growth (YoY) in the September 12 quarter over September 11.”

 

For the year ending September 2012, H&M’s consolidated revenues increased to Rs451.9 crore from Rs394.14 crore, over same period a year ago. Except that the market either does not believe in the numbers or does not believe that the future is all that rosy. The stock price of H&M is down from the intra-day high of Rs267 in early 2006 to Rs50 today. Crisil’s discovery of H&S’s hidden features is remarkable given that virtually no analyst tracks this company regularly.

 

Moneylife had previously reported about the bruising battle between H&M and Rajeev Sawhney. The battle started in 2005 when H&M announced a $19 million buyout of Vmoksha, co-founded by Rajeev Sawhney and Pawan Kumar (former CEO of the controversial DSQ Software), with the former putting in the money and the latter running the operations. Mr Sawhney soon realised that he had been kept in the dark about many aspects of the deal.

 

On 11 May 2005, both the companies signed a share purchase agreement under which V Ramachandran, chairman of H&M, was to pay $19 million for the three units, out of which $4 million was to be paid to Pawan Kumar, the then chief executive of Vmoksha and also former CEO of the controversial DSQ Software, as earn out. Although, Pawan Kumar and his family members were also stakeholders in Vmoksha, Mr Sawhney later bought out their stake as well.

 

Mr Ramachandran was supposed to pay $13.4 million to Mr Sawhney, after paying some amount to Tapan Garg and Madhuri Garg, son and wife of Pawan Kumar for their holding. Mr Sawhney soon realised that he had been kept in the dark about many aspects of the deal. For instance, he found that instead of receiving $19 million, a bank account had been ‘fraudulently’ opened in the State Bank of Mauritius in Vmoksha’s name and used to borrow $13.5 million, using a fake board sanction and false entries. That money was remitted to H&M ostensibly for subscription of redeemable preference shares on 28 June 2005.

 

Earlier in December 2011, the Supreme Court dismissed special leave petitions (SLPs) filed by H&M and Pawan Kumar, the then chief executive officer of Vmoksha Technologies. Both have challenged the Bombay High Court (HC) order, which allowed the revision application of Vmoksha’s co-founder Rajiv Sawhney against H&M.

 

In an order passed on 6 May 2011, the HC had restored an order passed by the Additional Chief Metropolitan Magistrate (ACMM) of the 47th Court at Mumbai, to restart proceedings against the accused, including H&M's chairman V Ramachandran.

 

Read more…

SC dismisses special leave petition of Helios and Matheson

Helios & Matheson under the scanner

 

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    User

    COMMENTS

    Harish

    6 years ago

    Lets wait for the final Judgement before we take a call who is right and who is wrong on this issue

    RAJESH NARANG

    7 years ago

    i am surprised that such a reputable agency ( atleat i thought so ) could give a 5/5 grading to H&M

    SUJIT KATYAL

    7 years ago

    Do we a regulator for these rating agencies too ?

    PR

    7 years ago

    These rating agencies are running a freak show. It is high time that something was done about them!

    PR

    7 years ago

    Crisil is an arm of Standard & Poor's -- their shoddy rating practices are very well known and well documented. Crisil seems to be in sync with the S&P model!

    SUJIT KATYAL

    7 years ago

    financial probity and corporate governance are two weak spots of indian businessses.

    TCS settles US wage dispute for $30 million

    The suit charged that TCS unjustly enriched itself by requiring all of its non-US citizen employees to endorse and sign over their federal and state tax refund checks to the company and by taking unauthorised deductions from employees’ paychecks

    Tata Consultancy Services (TCS), Asia’s largest software-services provider, has agreed to pay $29.8 million to settle a wage dispute in California with workers who were sent to work in the US from India.

     

    The complaint was filed by non-US employees Gopi Vedachalam and Kangana Beri, who were sent to the US to work on projects.

     

    The suit charged that TCS unjustly enriched itself by requiring all of its non-US citizen employees to endorse and sign over their federal and state tax refund checks to the company and by taking unauthorised deductions from employees’ paychecks.

     

    Terms of the settlement are described in a 21st February filing with US District judge Claudia Wilken in Oakland, California. The judge in April certified the case as a class, or group, lawsuit for all non-US citizens employed by the company in California from 14 February 2002 to 30 June 2005.

     

    “This was an extraordinarily hard fought case and we are proud of the result for the employees,” Kelly M Dermody, a lawyer for the workers, said in a communiqué.

     

    “TCS believes that it always acted appropriately notwithstanding the allegations in this case,” Michael McCabe, a spokesman for TCS, said. “The company has admitted no wrongdoing and none have been found by the court. It agreed to settle this matter to eliminate any on-going distraction to its associates and management.”

  • User

    COMMENTS

    Mohan

    6 years ago

    Same case with other Indian Companies as they are taking the Tax Refunds from the Employees, I Work CSC and they do take away the Tax Refunds from CSC Employees when this tax refunds is filled its based on the Employee Depedents (I mean the Intimised), Indian Companies can take everything from Employees as our Govt Laws are so weak and they are playing with rules.

    Govt withdraws Kingfisher’s flying slots; to be allotted to others

    Kingfisher Airlines was allowed to fly to eight foreign destinations—Bangladesh, Hong Kong, Nepal, Singapore, Sri Lanka, Thailand, Dubai and Britain—between 2008 and 2011

    The government on Monday withdrew all international flying slots given to now defunct Kingfisher Airlines, and said it would be distributed among other airlines.

     

    Kingfisher Airlines was allowed to fly to eight foreign destinations—Bangladesh, Hong Kong, Nepal, Singapore, Sri Lanka, Thailand, Dubai and Britain—between 2008 and 2011.

     

    The airline, which ceased operations on 1st October last year, used to offer 140 weekly flights to these destinations from various cities including Delhi, Mumbai, Kolkata and Chennai. The airline curtailed its international operations in March last year.

     

    “These international traffic rights have been withdrawn from Kingfisher Airlines on account of non-utilisation by the airlines,” the civil aviation ministry said in a statement. “This (traffic rights) would give additional availability of 25,000 seats per week for use by other Indian carriers to these eight countries, some of which are much in demand by these carriers.”

     

    The domestic slots of the airline have also been withdrawn with the Airports Authority of India (AAI) being directed to reallocate the slots to other domestic passenger carriers.

     

    Kingfisher’s flying licence was suspended 20th October last year, following a strike by employees that crippled the carrier's operations. The licence officially expired on 31 December2012, while a revival plan the airline submitted to the Directorate General of Civil Aviation (DGCA) was rejected due to the lack of “credible restart” details in it.

     

    The airline, promoted by liquor tycoon Vijaya Mallya, has two years to renew the licence to fly.

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