 "NSEL reaches settlement with 2nd-largest borrower")
In a deal inked after a marathon three-way meeting among the exchange, its borrowers and NSEL Investors Forum (NIF), Mohan India agreed to pay about Rs 771 crore of its combined obligation of Rs 908.09 crore (including group firm Tavishi Enterprises’ Rs 333.01 crore) in a final settlement.
The parties are said to have agreed on a lower sum as Mohan India claimed to have already made some payments to certain employees and entities of the Financial Technologies (FT) group, the anchor investor in NSEL.
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The details of the deal have been filed with the Forward Markets Commission, which is overseeing settlements; the economic offences wing (EOW) of the Mumbai Police, which is probing criminal violations; and the court hearing civil disputes. The approval of these agencies will be required for the deal.
The EOW on Wednesday said it had already frozen all personal accounts and lockers of FT promoter Jignesh Shah, besides those of Massey and Sinha in connection with the NSEL payment crisis.
Also, the police questioned the directors of two large borrowers, PD Agroprocessors and Lotus Refineries, on Wednesday, while a few other large ones have yet to be summoned. The EOW is also likely appeal for extension of the custody of Sinha and Patel, when the case comes up for hearing in the magistrates court on Thursday.
While Rs 11 crore has been paid as down payment, the remaining amount under the settlement will be cleared in several instalments over a period of one year. According to some people who have been part of the negotiations, the settlement plan is back-ended, with the bulk of the payments coming towards the end of the agreed cycle.
The plan stretches the original payment cycle announced in August by at least seven months. But, unlike the earlier plan, the deal is secured by asset mortgages and penal clauses for skipping or delaying instalments. Also, the elongated cycle might give the company enough time to liquidate its assets and generate cash. “These safeguards are what are giving investors some hope this time. In the early stages, if there is any default, Mohan India will have to pay up to Rs 150 crore as penalty,” an NIF member said.
The agreement has securitised 500 acres of Mohan India’s land near Bikaner (Rajasthan) and a 14,000-square-yard bungalow plot in New Delhi as part of the settlement process.
After signing the deal with NSEL MD & CEO Saji Cherian, Mohan India’s promoter and chief Jagmohan Garg told Business Standard: “I am happy that settlement has been reached.” A spiritual man, Garg later thanked “almighty Shiv Baba”, an unusual reference at a press release.
Mohan India, which had bought 216,324 tonnes of sugar for Rs 605.2 crore, was named by NSEL as one of its largest borrowers in early August. In 2011-12, the last year for which its financials are available, the company made a net profit of Rs 2,044 on revenues of Rs 72,400. Tavishi, on the other hand, was born just a couple of months before the exchange collapsed under its own weight.
At present, the two companies might virtually have nothing on their balance sheets, but they have several heavyweights backing them. These companies are promoted by an influential business family from Northwest Delhi. Garg was a Mohan India director, but he is better known as the man behind Mera Baba Reality, which has to its credit several projects, including malls that go with the D-MALL brand name, in Delhi’s Rohini and Pitampura areas. Also, it owns a Radisson hotel in Paschim Vihar.
Garg’s six brothers — Madanmohan, Manmohan, Harimohan, Adarshmohan, Radheymohan and Shreemohan — with Garg or Gupta as their surnames, have board positions in the Mohan India group. The family also runs a branch of the GD Goenka Public School in Rohini.
Former MD of Gujarat Ambuja and now chairman of Ican Investment Advisors, Anil Singhvi, who was roped in by the NSEL promoters to negotiate with investors and borrowers, and former MCX-SX CEO & MD Joseph Massey are understood to have played an important role in the settlement.
Mohan India’s Rs 908.09-crore obligation (including Tavishi’s) is next only to NK Proteins Ltd (Rs 969.89 crore).
Over the past two-and-a-half months, borrowers have paid back Rs 221.4 crore of NSEL’s total outstanding of Rs 5,572.75 crore. Of that, Rs 119.4 crore was paid by Topworth Steel, which had total dues of Rs 169.51 crore as on August 16.
Sources privy to the negotiations said: “More such settlement deals are likely to be signed over the next few weeks.” NSEL MD & CEO Saji Cherian said in New Delhi on Wednesday: “The relentless efforts of the new team at NSEL, along with NIF, over the past few weeks, is expected to show some positive results in terms of recovery from members. Some more members (apart from Mohan India) have come forward for settlement of their dues and talks with them are at various stages of finalisation.”
NIF Secretary Arun Dalmiya said: “Action by the EOW has helped hasten the settlement process with the borrowers.” The police have so far arrested three key former NSEL officials, including former MD Anjani Sinha, and NK Proteins’ Nilesh Patel.
Following the announcement that a settlement had been reached with Mohan India, the scrip of anchor investor Financial Technologies rose 10.6 per cent on BSE to close at Rs 173.75. MCX, another listed group company, also gained, with its stock rising 1.76 per cent to close at Rs 468.9 on Wednesday.
TOP NSEL BORROWERS
Members with the highest obligations as on August 16
- NK Proteins
Rs 969.89 cr - Mohan India (plus group firm Tavishi Enterprises)
Rs 908.09 cr - ARK Imports
Rs 719.50 cr - P D Agroprocessors
Rs 639.55 cr - Yathuri Associates
Rs 424.64 cr - Loil Continental
Rs 335.15 cr - Loil Health Foods
Rs 252.56 cr
Rs 220.20 cr
Rs 169.51 cr
Rs 5,572.75 cr