Exclusive: Did Anugrah Maintain Two Different Ledgers for Clients and Regulators?
The story of crisis-hit Anugrah Stock and Broking Pvt Ltd is getting murkier day by day. There is now an admission that it was running a Ponzi scheme for many months and it also appears the brokerage may have been maintaining two different ledger accounts, one for its clients and another for regulators.
Most clients are unable to match their account balance with the data available with clearing member or regulators.
In a startling revelation, a person associated with Anugrah Stock and Broking, and close to the founder Paresh Kariya, admitted that the firm was running a Ponzi for several years. He made this admission to an officer of a securities law firm started by a top official of SEBI (Securities and Exchange Board of India), that Anugrah had been “camouflaging its losses through fresh money coming in from new investors.”
However, after a sharp fall in the market earlier this year, they could not meet margin calls and Edelweiss Custodial Services Ltd, its clearing broker (at that time), had sold their stocks to meet the shortfall (in line with the rules of National Stock Exchange-NSE).
The bulk of investors in Anugrah, nearly 85% of all clients, have come through an associate firm called Teji Mandi Analytics Pvt Ltd (TMA). The exact relationship between these firms and their financial arrangements are unknown. However, the broking relationship and the power of attorney (POA) signed by all TMA investors are with Anugrah. This means that Anugrah/ TMA has been paying investors and maintaining the pretence of success from early this year by continuing to make payments.
An investor has sent us the chart below of returns paid out by TMA which, indeed, corroborates this claim because it shows that no payments were made in February 2020; there were low returns in March 2020 too. Even when it was unable to pay investors (barring a few) in June and July 2020, there were apparently no warning bells, right until NSE shut down Anugrah’s derivatives trading on 3rd August.
NSE has also revoked all POA to the broker. So, barring some shares that are with the Central Depository Services Ltd (CDSL), things look bleak for investors until more information is available from investigators. The more savvy investors have quickly checked their accounts in CDSL—some have found there are no shares anymore and a few others have locked their accounts to prevent whatever is remaining in their account from being transferred out.
Direct Borrowings and AR Capital
When Anugrah approached the Securities Appellate Tribunal (SAT) in August after its derivatives business was shut down by the NSE, the Tribunal noted that it has been running an unauthorised derivatives advisory scheme (DAS), which collected over Rs165 crore through an associate firm call Om Shri Sai Investments (OSSI). That scheme, the order noted, was shut in 2019.
TMA may have been following the same modus operandi. While it had over Rs800 crore in a depository scheme, which it touted with an elaborate slide presentation and claims to use a sophisticated algorithm, it was also taking direct loans in an associate company called AR Capital. TMA’s partners Anil Gopal Gandhi and Riddhi Kalapi Shah were directors of this firm and it was probably used for proprietary trading. The lenders to AR Capital are also trying to recover their money.
Anugrah Shut Again
Anugrah Stock and Broking, which won a reprieve from SAT on 17th August, was unable to deposit Rs165 crore with the NSE by 1st September. The Exchange had withdrawn its trading rights and also seized its computers and books, the brokerage firm has told investors thronging to its office.
Threats and Fear of Absconding
Investors desperately seeking answers from Anugrah have approached local politicians who stormed the office, issued threats and did some damage. This has also led to fears that the promoters may choose to abscond. One of the partners of TMA is already understood to have left the country.
Allegations against Clearing Members
The role of the two clearing members for Anugrah Stock and Broking is also interesting and confusing. The brokerage has made allegations of unauthorised sales against Edelweiss Custodial Services and claims to have asked NSE for an audit, according to what the promoter informed to an advocate fighting for investors.
Edelweiss first told Moneylife that it terminated its relationship with Anugrah as a client in early June after following a due process. However, we now learn that the account actually moved to ICICI Bank only on 20th July. The reason for this wrong claim by Edelweiss is unclear.
However, sources close to Edelweiss also insist that Anugrah Stock and Broking had been hitting losses mark-to-market (M2M) for several months and had been repeatedly cautioned. Also, the account moved to ICICI Bank only after a full and final settlement and receiving all appropriate no objection certificates (NOC) from all parties.
Yet, Anugrah Stock and Broking has been asserting that Edelweiss sold shares rather than invoke the bank guarantee available with it. Was it a defective bank guarantee? Will NSE provide answers and will SEBI ask the right questions? That remains to be seen.
Meanwhile we understand that NSE told ICICI Bank, its new clearing broker, to square off all open positions – over Rs50 crore – which it did. Of these, over Rs30 crore were settled through bank guarantee (of ICICI Bank) while the rest came from sale of shares maintained in margin accounts.
Interestingly, there are no complaints from Anugrah Stock and Broking about this action by ICICI Bank.
Litigation and More
Last week, the Bombay High Court has barred the crisis-hit brokerage from using assets worth Rs58 crore that belongs to more than 25 investors who filed a petition after the firm has stopped responding to them and their accounts have become inaccessible. However, a few hundred more are desperately seeking remedies for multiple exposures to the group.
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