Scamsters can tap Indian capital markets just paying penalty!

In March 1993, Ahmedabad-based Thakkar brothers Yashwant and Rashmikant floated public Amrapali Industries Ltd (AIL). This so called ‘existing, profit-making’ company offered shares at par and raised Rs 3.68 cr. In the post-issue capital of Rs 5 cr, the promoters were to hold Rs 1.32 cr (26%). At the time of going public, the company had a turnover of about Rs 10 cr, largely from texturised yarn.  AIL tapped the market to set-up a project for manufacture of decorative laminates. According to the offer document dated February 9, 1993, the laminates project was to start production in June 1993.

Twenty years have passed since AIL went public. The company’s turnover has galloped over Rs 4700 cr (in fiscal 2012). Its capital base has increased more than five-folds to Rs 25.71 cr. Promoters’ stake has shot up to more than 74%. But, what did the public shareholders get? Not even peanuts!  

For twenty long years no dividend was paid and the share is currently languishing below par. Even though the top line is worth more than Rs 4700 cr, net profit is less than Rs 25 lakh! After two decades, the company’s accumulated surplus is just little over Rs 1 cr! If operations were resulting in wafer-thin margins, how come the promoters’ stake was hiked from Rs 1.32 cr to over Rs 19 cr?

Name is ‘Industries’ but, AIL’s actual activity is commodity trading! What happened to its texturising and laminates business? No explanation made.  If it is a commodity trading company, how BSE has allowed it to retain the name ‘Industries’? AGM time is over but, the company has not filed the fiscal 2013 Annual Report with the Stock Exchange! The company utterly lacks standards in corporate governance. Yet, for no rhyme or reason, BSE has allowed the company to split the stock. The over-friendly BSE is now facilitating the Thakkars to float another public issue, this time on its SME platform!

Amrapali Capital and Finance Services Ltd (ACFSL), a company promoted by the Thakkars in 1994, that is a year after AIL went public, is offering 25.78 lakh shares of Rs 10 each at a whopping premium of Rs 90 a piece. The draft offer document signed on September 19, 2013, claimed the Rajkot-based Sunflower Broking as the ‘market maker’ of the IPO.  However, the final offer document signed October 9, 2013, has replaced the market maker with the Ahmedbad-based Khajanchi & Gandhi Stock Broking!

Interestingly, like AIL, ACFSL too has a large net worth (more than Rs 52 cr) but, its bottom line is miniscule (Rs 17 lakh) even after 19 years of operations! For a company whose EPS is just 24 paise and has a ‘proven record’ of no dividend and abysmal profitability, who will subscribe to ACFSL share at a price of Rs 100?

In a way, by providing the SME platform, BSE is aiding the Thakkars to continue their manipulative activities. BSE is so incompetent that its vetting department has allowed the Thakkars to omit the track record of their maiden public venture (AIL) in ACFSL’s offer document. When AIL itself has become a trading company with poor public servicing record, how BSE is allowing ACFSL, a broking company with no credible profitability, to tap the public?

ACFSL, who initially shared the registered office of AIL, presents the next generation Thakkar brothers, Monal and Chirag, sons of Yashwant Thakkar, as promoters. While Chirag gets involved fully with the company as a whole-time director, not much is talked about Monal. Why should the co-promoter keep himself away from the company? This perhaps speaks volume about the background of the promoter.

The offer document boasts that the promoters, promoter group, directors and group companies had not been prohibited from accessing or operating in the capital markets under any order or direction passed by SEBI or any other authorities. But, the fact is, Monal Thakkar, promoter of ACFSL, Ritaben Thakkar and Veenaben Thakkar, promoter group, had acted as financiers for IPO subscription of Yes Bank, IDFC and IL&FS through applications in fictitious names and became the ultimate beneficiaries in the scheme of cornering retail allotment and forking out big gain on sale immediately after listing. Since they had violated the regulations, SEBI issued directions to the Thakkars not to buy, sell and deal in securities market including IPOs, directly or indirectly. Finally, the Thakkars proposed a settlement under which Monal Thakkar paid Rs 29,17,331 towards disgorgement charges and Rs. 5,83,669 towards settlement charges, Ritaben Thakkar paid Rs 30,98,785 towards disgorgement charges and Rs. 6,20,215 towards settlement charges and Veenaben Thakkar paid Rs 3,52,242 towards disgorgement charges and Rs. 70,758 towards settlement charges.

Also, ACFSL itself has been repeatedly fined by the stock exchange during the last four years. It paid a penalty of Rs 21 lakh in fiscal 2012. If people who have no respect for the law of the land are allowed to tap public money, what can the investors expect from such promoters? Also, if scamsters can go scot-free with a penalty and float public issues without any hurdle, how can SEBI expect the public to participate in the IPOs?

 

OFFER AT A GLANCE
Issuer Name	Amrapali Capital & Finance Services
Offer Amount	Rs 25.78 cr
Offer Quantity	25.78 lakh shares of Rs 10 each
Offer on Total Equity	26.4%
Post-issue Promo stake	51.7%
Post-IPO Capital	Rs 9.78 cr
Offer Price	Rs 100
Application Quantity	1,200 & Multiples of 1,200
Offer Opens	October 15, 2013
Offer Closes	October 18, 2013
Listing	SME Platform of BSE
Rating	Nil
Lead Manager	Corporate Strategic Allianz
Market Maker	Khajanchi & Gandhi Stock Broking
Registrar	Satellite Corporate