N Prasad of Matrix Lab arrested for sweetheart deal with Jagan Reddy
Moneylife Digital team 16 May 2012

According to CBI, Prasad invested several hundred crores of rupees in companies floated either by YSR Reddy or his son, Jaganmohan Reddy and paid huge premium for the shares, which was nothing but a quid pro quo deal

Nimmagadda Prasad alias Matrix Prasad, touted as entrepreneur with a golden touch in the pharma industry, has been arrested by the Central Bureau of Investigation (CBI) in the alleged disproportionate assets case involving YS Jaganmohan Reddy. Mr Prasad allegedly invested Rs500 crore in different businesses of the Member of Parliament (MP) from Kadapa and president of YSR Congress.

The CBI, in its charge-sheet filed in the disproportionate assets case, alleged that Mr Prasad invested huge money in Jagan's business ventures as a quid pro quo for the benefits he secured from the then YS Rajasekhara Reddy (YSR) government.

He is charged with investing Rs100 crore in Jagati Publications that publishes Sakshi Telugu daily, besides putting in another Rs244 crore in Bharati Cements and Rs200 crore in Carmel Asia, all floated allegedly by Jagan.

The then government headed by Jagan's father (late) YS Rajasekhara Reddy allegedly allotted 15,000 acres of land in Prakasam and Guntur districts to Matrix Enport, the company owned by Prasad, for development of the Vadarevu-Nizampatnam Port and Industrial Corridor. Till date the project, initiated in 2007, has not made any progress. Under the YSR government, it was common in Hyderabad for politicians to sell stakes in companies controlled by them to big businessmen at a premium. In return for investing in these front companies, the businessmen got hold of natural resources (like iron ore) or land for infrastructure projects. This is exactly what seems to have transpired in this case too.

According to the CBI, three companies started by Mr Prasad bought shares in Jagan's companies by paying huge premium. The companies, Gilchrist Investments Pvt Ltd, Alpha Villas Pvt Ltd and Alpha Avenues Pvt Ltd bought shares in Jagan's companies at a premium of Rs350 apiece for a share with face value of Rs10. This is a quid pro quo deal, feels the CBI.

Mr Prasad, better known as Matrix Prasad, was touted to have a golden touch in the pharma sector. In 2000, he bought a small company for Rs3 crore and in 2009, sold his stake for Rs570 crore, a at a whopping 18,900% gain, something unheard of in any business. In the same year, he bought Herren Drugs and Pharmaceutical, a sick unit and renamed it as Matrix Laboratories. In the next six years till 2006, he bought Medicorp Technologies, Fine Drugs and Chemicals, Belgium-based Docpharma, China-based McChem Group and a controlling stake in Concord Biotech.

His first moment of huge success came in 2006, when he sold his 71.5% stake in Matrix Labs to US-based Mylan Laboratories for Rs800 crore. This was one of the biggest merger and acquisition (M&A) deals at that time. Mr Prasad received big money for a successful pharma business, but went on to diversify into cement, power, media, and infrastructure and hospitality businesses-ostensibly with political support.

Mr Prasad owns or has big stakes in Indu Projects, MAA Television Channel, software firm Infotech Enterprises, Care Hospitals and voice-enabled email provider NowPos.

Along with him Congress MP Chiranjeevi, his brother-in-law Allu Aravind and Telugu actor Akkineni Nagarjuna too have stakes in Maa Television. Last week, the Income Tax Department, found Rs35 crore unaccounted cash from the residence of Chiranjeevi's son-in-law Vishnu Prasad in Chennai.

What is surprising is YSR Congress, the political outfit floated by Jagan, has alleged that this money was part of quid pro quo to effect merger of Chiranjeevi's Praja Rajyam Party (PRP) with Congress. Last year in August, PRP was merged with Congress and the Tollywood actor-turned-politician is waiting for a berth in the Union Cabinet.

Last year, the CBI raided premises of Matrix Prasad's various companies in Hyderabad and other parts of Andhra Pradesh during the inquiry into assets of YSR Reddy, with whom the entrepreneur shared very close relations.

The CBI is also scrutinising companies of both Mr Prasad and Jagan and their investments. Several promoters in these companies started by the two are said to be same.

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