Politically-connected Alchemist group under regulatory fire
Troubles seem to be raining on the once politically powerful Kanwar Deep Singh (KD Singh), a politically powerful member of parliament (MP) in the Rajya Sabha representing the Trinamool Congress. He is also the owner of Anant Media which runs the Tehelka magazine. The Securities and Exchange Board of India (SEBI) had ordered prosecution against the larger group company, Alchemist Infra Realty Ltd (Alchemist Infra), in May 2015. Now, it has now cracked down on Alchemist Capital as well.
SEBI wants Alchemist Capital to refund the Rs165 crore raised through illegally issued redeemable preference shares. The money has to be paid with 15% interest compounded half-yearly. The history of SEBI’s investigation and order show that Mr Singh was the person in charge of Alchemist Capital, in 2003, when it was on a fund-raising spree without proper regulatory approvals. So Mr Singh and nine other associates have been “restrained from accessing the securities market” and “prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner”, with immediate effect. Also, the order will remain in force for four years from the date of completion of refunds.
Mr Singh’s troubles at Alchemist Infra are far worse, since the amount involved is over Rs1,000 crore. In July 2013, the Securities Appellate Tribunal (SAT) directed the group to refund over Rs1,000 crore collected from 1.5 million investors in 18 months. The funds were raised through an unauthorised collective investment scheme (CIS).
In a repeat of the Sahara case, Alchemist Infra, too, had submitted documents to the regulator claiming to have refunded over Rs1,000 crore to investors, as ordered. However, the names and payment details, asked for by SEBI, were apparently not forthcoming. It is this that differentiates CIS schemes from Ponzi schemes. The latter raise funds from real, identifiable investors, who receive fabulous returns, because they help lure more and more people to invest, based on false promises.
Mr Singh’s is a mysterious rags-to-riches story. He claims to preside on a Rs10,000-crore business empire that includes chicken farming, real estate, food processing, healthcare, aviation, etc, and, of course, there is Tehelka in which he holds almost all the shares today. Some of the biggest CIS violators who have thrived for two decades by claiming to have raised funds from faceless investors, who can be identified for claiming refunds, are now meeting their nemesis. If SEBI manages to make all the major CIS promoters shut shop, it shows that a major systemic clean-up of unaccounted funds is possible even with the existing rules.