Moneylife Foundation has been receiving complaints from its members that they are not receiving their fixed deposit maturity amounts from two Yash Birla Group companies namely Zenith Birla (India) and Birla Power Solutions. Is there financial trouble brewing in the group?

The economic slowdown and its impact on corporate performance is now beginning to hurt investors who have trusted their money to unsecured fixed deposits of a clutch of companies. Investors are writing to us to complain that they are not getting back their maturity proceeds from two Yash Birla Group companies, Zenith Birla (India) and Birla Power Solutions.
 

The Yash Birla Group of companies has been struggling, if the share price is anything to go by. As you will see from the table below, none of the Yash Birla Group companies are quoting at double digits. Out of the eight companies, all but one gave negative returns since 1 March 2013. Is there trouble for the group that the shareholders do not know about?
 

The table below shows the stock price performance of all the Yash Birla Group companies:
 

Recently, the Chennai-based Apollo Hospitals called off its joint venture with the Yash Birla Group, citing delays in obtaining approvals. Interestingly, fixed deposits-related issues plagued  Zenith Birla (India) and Birla Power Solutions. The latter had problems paying its tax dues as well.

According to the annual report, Birla Power Solutions not only did not issue fixed deposit receipts but the auditors also discovered there was a shortfall in liquid assets too. More pertinently, the auditors also discovered tax arrears with respect to dividend distribution tax and sales tax. However, the company admitted that the financial crunch made it more difficult to bridge the shortfall and pay taxes. It said, “The company could not pay the dividend distribution tax of Rs261.54 lakh and the arrears of sales tax due of Rs23.64 lakh due to severe financial crunch. The company will pay these dues as soon as the financial position improves.” Similarly, it could not bridge shortfall of Rs9.31 lakh due to poor economy.
 

The auditor stated in the company’s 2012 annual report: “We have to state that the company has invested Rs283.55 lakh out of the amount of Rs292.86 lakh, in liquid assets. Further there has been delay of some days in obtaining the said assets. There has also been a small delay in issue in Fixed Deposit Receipts to the extent of Rs105.98 lakh during January and February 2012 consequent to the change in the registrar of the company.”
 

Birla Power Solutions has fixed deposits to the tune of Rs57.92 crore as of 31 March 2012. The company too claims that there are no unpaid deposits. Another company, Birla Cotsyn, has Rs5.61 crore of fixed deposits with no unclaimed fixed deposits.
 

Similarly, Zenith Birla (India) too had troubles with issuing fixed deposit receipts. Last year’s annual report of Zenith Birla (India) reveals something that has relevance to fixed deposit holders of the company. Apparently, the company had failed to issue fixed deposit receipts to the extent of Rs78.16 lakh, as discovered by auditors, last year in January and February. The auditors stated: “In respect of compliance by the company with the provisions of Sections 58A and 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975, with regard to the deposits accepted from the public, we have to state that there has been a small delay in issue of Fixed Deposit Receipts to the extent of Rs78.16 lakh during January and February 2012 consequent to the change in the registrar of the company.”
 

The company defended its position by stating that the delay was due to changing its registrar. The statement said: “The company had changed its registrar to the Fixed Deposit scheme from Link Intime India Private Limited (Link Intime) to Adroit Corporate Services Private Limited (Adroit) in the month of January 2012. The company thought it prudent to change the registrar due to better services and upgraded software used by Adroit as compared to Link Intime. As Adroit had to set up the Fixed Deposit system post shifting of the records from Link Intime, there had been a small delay in issue of Fixed Deposit Receipt.” As of 31 March 2012, Zenith Birla has fixed deposits of Rs33.19 crore, but claims that it has not defaulted on them.
 

Moneylife sent an email to the Yash Birla companies for their responses. Till the time of writing the story, we have not received any answers from them. We will incorporate their answers as and when we receive them.