When journalist Tamal Bandopadhyaya tweeted a notice about a loan given by three top banks—IDBI Bank, HDFC Bank and Bank of Baroda (BoB)—to Great Indian Nautanki Company with the loan being guaranteed by Great Indian Tamasha Company, I thought it was a joke.
It was; but the joke was on us, investors and customers, because it shows how lightly banks take their fiduciary responsibility of vetting companies that they lend our money to. Together, they are attempting to recover at least Rs150 crore. The names alone caused enough outrage for the tweet to go viral on Twitter. Here is what this is about.
IDBI Bank Ltd issued an advertisement about an e-auction for sale of a property to recover nearly Rs93 crore lent to the Great Indian Nautanki Company Pvt Ltd (Great Nautanki) as of 1 May 2022.
It planned to do this by selling the property of its corporate guarantor, the Great Indian Tamasha Company Pvt Ltd (Great Tamasha), a Delhi-based company incorporated in January 2008 which is into ‘sporting and recreational’ work.
Great Nautanki, incorporated in September 2007, is a subsidiary of Wizcraft International Entertainment Pvt Ltd (Wizcraft) and runs a vast outdoor live event venue called Kingdom of Dreams spread over six acres of land at Gurugram. Another media report says it is owned by Wizcraft International Entertainment and Apra group.
Great Nautanki also owes at least Rs6.25 crore to HDFC Bank (as per a December 2015 notice) and Rs49.23 crore to BoB (as per a February 2015 notice).
Further, Zaubacorp.com shows significantly higher charges and borrowings from the same three banks under Great Tamasha (Rs22.5 crore to HDFC Bank, Rs50 crore to IDBI Bank and Rs47 crore to BoB) which is the guarantor. So the total amount owed to these banks by the three companies is currently unknown.
We also don't know if the three banks have lent to other companies at the very same address in Delhi. Most have at least one common Anumod Sharma or Nilima Sharma and, in most cases, Sanjay Choudhry. Most of these companies have been set up between 2008 and 2013.
For instance, Great Indian Craftsman Hospitality Pvt Ltd, set up in 2012, is into hotels, camping sites and the hospitality business and has Anumod Sharma and Sanjay Choudhry as directors. But a very similar-sounding Great Indian Hospitality Pvt Ltd, with Anumod Sharma and Gajinder Singh Bhogal as directors was already set up in 2008 for the exact same business and shows www.kingdomofdreams.co.in as its website.
Great Coating Solutions Pvt Ltd, set up in 2013 with Anumod Sharma and Gajinder Bhogal as directors, also has the same address. SG Investments Pvt Ltd, incorporated in 2008, has Anumod Sharma and Nilima Sharma as directors and is into what is described as ‘activities auxiliary to financial intermediation’. International Institute of Media and Entertainment Pvt Ltd, with the same [email protected] email and Anumod Sharma and Sanjay Choudhry as directors, was incorporated in 2011.
Then there are the three Apra companies—Apra Auto (India) Pvt Ltd (this goes back to 1999 and is in the auto-accessories business with Anumod Sharma and Sanjay Choudhry as directors); Apra Craft Traditions India Pvt Ltd (set up in 2008, is a commission agent, auctioneer and commodity broker that has Neelima Sharma and Archana Saxena as directors); Apra Realty & Infra Pvt Ltd (is into buying and selling real estate and was set up in 2012; it has Anumod Sharma and Sanjay Choudhry as directors).
Why does any of this matter? Because it is clear from IDBI Bank’s advertisement that these companies have been giving guarantees to one another to raise bank funds. The advertisement lists Anumod Sharma, Dr Anu Appaiah, Viraf Sarkari, Sanjay Chaudhry, SG Investments and Wizcraft as other guarantors, apart from Great Tamasha and Wizcraft.
While all the action is in Delhi, the property (land parcels totalling 107 acres) of Great Tamasha being auctioned is in Madikeri taluka in Karnataka’s Kodagu district for a reserve price of a mere Rs11.53 crore. Some sources suggest that the reserve price is shockingly low; but that is another can of worms that is not the subject of this column.
The key company here that made the Tamasha and Nautanki acceptable to banks is Wizcraft. It was at one time a high-flying company that organised live events for global celebrities, and grand award ceremonies for sporting events and the film industry. It clearly spun off Great Tamasha to create a live entertainment destination at Gurugram called ‘Kingdom of Dreams’ that has its own wiki page and was apparently a ‘happening destination’ until the pandemic disrupted its business.
In May 2021, bankruptcy proceedings by IDBI Bank against Wizcraft were admitted by the National Company Law Tribunal (NCLT). IDBI Bank claimed that Wizcraft had issued an ‘unconditional and unrecoverable (sic)’ guarantee of Rs60 crore on behalf of Great Nautanki—the original borrower and defaulter. Wizcraft did not succeed in its attempt to deny the liability, which was a continuing one until the full loan with interest, cost, charges, etc, was paid. Unlike the fake narrative being peddled on social media to defend Great Nautanki and Wizcraft, the defaults began in 2014 and it was classified as a non-performing asset, way before any damage by COVID.
When asked by Moneylife, IDBI’s chief general manager Saumya Chaudhuri, in an email response, wrote that Great Nautanki “was in operation until Covid restrictions were imposed in March 2020 and its lending decision in 2009 was based on ‘due appraisal of operations of the borrower’.”
At the same time, he says, “Prompt recovery actions were initiated by IDBI Bank against the borrower in 2014 itself by recalling the loans / invoking the guarantees and initiating SARFAESI action against property of the Borrower.” Does this mean that Great Nautanki was operational until COVID, but making huge losses in less than five years after it borrowed funds?
According to IDBI Bank, ‘rigorous recovery actions’ were initiated against Wizcraft and it sees “further scope of substantial recovery through SARFAESI auctions and Corporate guarantees, etc.” With a low reserve price even in this case, it remains to be seen whether substantial recovery would be achieved. Even though Wizcraft had a turnover of Rs327 crore and a net-worth of Rs46 crore in 2018-19, it would also have been impacted by the COVID pandemic. Moreover, it has borrowings from several banks other than these three.
Mr Chaudhuri contends that IDBI Bank has not been the largest lender to Great Nautanki at any point of time and the outstanding of other banks stated in the advertisement have different dates. We already know, BoB and HDFC Bank have lent a lot more to this group than shown in the advertisement—this would only make ‘substantial recovery’ more difficult.
IDBI claims that this lending “was handled as per the normal lending norms after examining the viability along with other Banks in the ordinary course of business,” but did it bother to examine the clutch of new companies that were incorporated by the promoters in the same five years when Great Nautanki turned loss-making? How were they funded? I am sure some digging will throw up uncomfortable answers.
Remember, IDBI Bank itself has been bailed out by the government, with public funds from the exchequer as well as Life Insurance Corporation of India Ltd (LIC), to keep it afloat. The latter, as a listed entity, has recently transited from a handmaiden of the government, to one that owes its first responsibility to investors.
How Crucial Is a Name?
Now, let us look at why ridiculous and pejorative names like ‘Great Tamasha’ and Great Nautanki’ ought to have raised a red flag with the lenders.
Every book on marketing, branding and entrepreneurship stresses on the ‘monumental role’ of a corporate name in the perception of a brand. It is not only the first point of reference with customers (and hopefully lenders) but entire relationships are built around how it presents itself. So, a deliberately frivolous and pejorative choice suggests a kind of flippancy that ought to have been a red flag, especially to staid, traditional bankers. After all, they are not angel investors willing to bet on a risky venture which shows great potential.
In any case, both Great Tamasha and Great Nautanki are essentially doing event management at a specific destination—like an amusement park or another Disneyland. That may perhaps have worked if all the skills sets, rights and talents were owned and concentrated in one company, instead of being distributed across multiple entities that were incorporated in quick succession with the same address.
Bankers are supposed to be rule-bound and boring people fixated on numbers with a heavy fiduciary responsibility to make correct lending decisions. Had they done so, they would have avoided the tamasha of dragging a guarantor through bankruptcy proceedings and the nautanki of having multiple guarantors for a high-risk entertainment business notorious for payment problems.
Excellent article. At first I thought this was an April 1st spoof, but alas reality is more strange than fiction. I am not sure if the Indian taxpayer should laugh or cry at this humorous 'nautanki' of lending large and recovering a small fraction. On the one hand there are many small business owners who are being put through unnecessary hassles for a small loan, while such large amounts are dispersed to these business magnates without any background checks or credit checks.
It would be interesting to know why the auction has such a low reserve price and who ends up buying it. I wouldn't be surprised if the same land becomes a collateral for the next business venture of these enterprising founders. "Lootera ventures".
The key questions which should have been asked:
(1) Purpose of the loan
(2) Type of loan or advance - Cash Credit/ Overdraft or term loan.
(3) mode of repayment
(4) means of repayment
(5) Corporate / other guarantees will be revoked only when the primary security has failed.
In this case, since this was an event management company, were their receivables hypotecated to the bank.
These are elementary questions which any entry level manager who has done corporate appraisals would have asked.
It is a great con job that every company becomes guarantor of other company and that's called a 'circular guarantee job' like we have 'circular trading' in stock market to jack up the price of a con scrip.
Grate Job. Kudos to your investigative journalism. Surprisingly the names itself would have been enough not to enter into lending decision. Multiple companies incorporated with the same address should have been put the bank into refusing to touch it . The accountability itself is totally not practicable in this case, as the officials sanctioning the loan must have retired by now or reached in to another world. Recovery of the assets will have more claimants than only three banks. It is surely more than what appears. The most important thing is that almost all banks in India have such big cans of worms, which is due to nexus between con men and bank officials with blessings of political topnotch.
Tamal Sir only initiated the ball rolling in a sarcastic manner and hope he would cover it in his own way in his next column,however thanks a lot that you with your investigative journalism and with an eye on numbers and modus operandi opened the can of worm of hidden toxic assets of Indian Banking System.Some questions come up in the mind as a Tax Payer:
?Whether our Banks even Private Sector Banks are comprtent enough to appraise Project Finance.
?Do they care much touted Risk Management theories and practice in real sense.
?What about the fixing accountability of the Sanctioning and monitoring authority.
We wish another 1992 type Thriller,if not at least Short Story from your end.
I don't understand how long the banks will take ti complete the impropriety made in lending from 2004 to 2014 and when will they start provisiining for defaults in the years beginning with 2014. It is really scary.
The story demonstrates the poor understanding of their basic responsibility - credit risk assessment and they cry hoarse if the officials are made accountable for such lapses! They blame on the three 'C's not that the three Cs are angels. But the investigations, regular audits, their oversight by the regulator, also watched the Tamasha and Nutanki on the dais of public resource platform. Incredible India!!
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This means access to other articles (outside the subscription period) are not included.
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It would be interesting to know why the auction has such a low reserve price and who ends up buying it. I wouldn't be surprised if the same land becomes a collateral for the next business venture of these enterprising founders. "Lootera ventures".
(1) Purpose of the loan
(2) Type of loan or advance - Cash Credit/ Overdraft or term loan.
(3) mode of repayment
(4) means of repayment
(5) Corporate / other guarantees will be revoked only when the primary security has failed.
In this case, since this was an event management company, were their receivables hypotecated to the bank.
These are elementary questions which any entry level manager who has done corporate appraisals would have asked.
?Whether our Banks even Private Sector Banks are comprtent enough to appraise Project Finance.
?Do they care much touted Risk Management theories and practice in real sense.
?What about the fixing accountability of the Sanctioning and monitoring authority.
We wish another 1992 type Thriller,if not at least Short Story from your end.