 "Promoter has to repay all investors: Motilal Oswal")
Like other leading brokers, Motilal Oswal, Chairman of Motilal Oswal Financial Services, is the man in the middle of a payment crisis in National Spot Exchange Ltd.
While in one hand, the company’s clients are after them to get back their dues to the tune of close to Rs 260 crore from Oswal, the exchange has defaulted on the payments of close to Rs 5,500 crore to all investors thus sending the Mumbai financial community into a tizzy.
Dev Chatterjee & Clifford Alvares spoke to Oswal to find out how the brokers will solve the NSEL crisis. Excerpts:
The NSEL has now defaulted to payments to your firm and numerous other customers… what will be your future action?
We are looking at taking legal action on behalf of our customers as well as from our own side. The NSEL kept all of us in the dark about the crisis. Around July 12th, its former CEO and MD, Anjani Sinha came to our office to convince us that everything is fine and all payments will be made in time.
Many other times we were shown auditor’s certificates that there are enough stocks in the godowns. They kept on misleading us that they have enough stocks, margins and trade guarantee money.
During the presentation before Secretary, Department of Consumer Affairs on 10th July, and during the meeting with FMC, Jignesh Shah, Director, NSEL had said that NSEL offers highest level of safety for the participants as the model has over 100% stock as collateral (managed by independent collateral manager), 10-20% as margin money and backed by 100% of post dated cheques from participants.
But as we realized later that this was just to hoodwink us and to perpetrate a fraud on investors. Their chairman's son in law is lent 700 crore.
Don’t you think that the brokers like you are also responsible for advising your clients to invest money in the exchange?
As brokers, we are doing business with many exchanges including NSE, BSE and other commodity exchanges. It is our business to market the exchange products. There is no mis-selling at our end. There is lots of trust and faith when it comes to exchanges. We cannot take responsibility if a fraud is being committed.
The fact is all of us have been taken for a ride. The biggest joke is that after the crisis started, the whole board is able to collect mere Rs 75 crore in the last 20 days out of Rs 5,500 crore default. The removal of the MD of NSEL (Sinha) yesterday is just another ploy to hoodwink investors. The entire board of NSEL including Shah will have to take blame for this.
In a crisis, a leader has to lead from the front and not from behind. This is exactly what Shah is doing. Its only Shah who can restore confidence or else all the business of other exchanges will flow to other players.
The government is seriously looking at the entire NSEL payment crisis episode… what action are you expecting from the government?
The existing management has lost trust and confidence. Like in the case of Satyam, Ministry of Corporate Affairs should immediately takeover the assets of NSEL and other associate companies and godowns and appoint auditors to check the money trail before and after the payment crisis.
There are 24 defaulters who should be made to pay money to investors as soon as possible. The promoter is liable for this crisis and they have to pay all investors who have put in their hard earned money in the exchange. There are around 15,000 investors.
What other action are you taking to force NSEL and its promoters to pay up?
To begin with, we (including other leading brokers and investors) are working on legal options and are advising all our clients to be very careful to do business with any other exchanges floated by the FT group. Already a lot of brokers has reduced their business.
While in one hand, the company’s clients are after them to get back their dues to the tune of close to Rs 260 crore from Oswal, the exchange has defaulted on the payments of close to Rs 5,500 crore to all investors thus sending the Mumbai financial community into a tizzy.
Dev Chatterjee & Clifford Alvares spoke to Oswal to find out how the brokers will solve the NSEL crisis. Excerpts:
The NSEL has now defaulted to payments to your firm and numerous other customers… what will be your future action?
We are looking at taking legal action on behalf of our customers as well as from our own side. The NSEL kept all of us in the dark about the crisis. Around July 12th, its former CEO and MD, Anjani Sinha came to our office to convince us that everything is fine and all payments will be made in time.
Many other times we were shown auditor’s certificates that there are enough stocks in the godowns. They kept on misleading us that they have enough stocks, margins and trade guarantee money.
During the presentation before Secretary, Department of Consumer Affairs on 10th July, and during the meeting with FMC, Jignesh Shah, Director, NSEL had said that NSEL offers highest level of safety for the participants as the model has over 100% stock as collateral (managed by independent collateral manager), 10-20% as margin money and backed by 100% of post dated cheques from participants.
But as we realized later that this was just to hoodwink us and to perpetrate a fraud on investors. Their chairman's son in law is lent 700 crore.
Don’t you think that the brokers like you are also responsible for advising your clients to invest money in the exchange?
As brokers, we are doing business with many exchanges including NSE, BSE and other commodity exchanges. It is our business to market the exchange products. There is no mis-selling at our end. There is lots of trust and faith when it comes to exchanges. We cannot take responsibility if a fraud is being committed.
The fact is all of us have been taken for a ride. The biggest joke is that after the crisis started, the whole board is able to collect mere Rs 75 crore in the last 20 days out of Rs 5,500 crore default. The removal of the MD of NSEL (Sinha) yesterday is just another ploy to hoodwink investors. The entire board of NSEL including Shah will have to take blame for this.
In a crisis, a leader has to lead from the front and not from behind. This is exactly what Shah is doing. Its only Shah who can restore confidence or else all the business of other exchanges will flow to other players.
The government is seriously looking at the entire NSEL payment crisis episode… what action are you expecting from the government?
The existing management has lost trust and confidence. Like in the case of Satyam, Ministry of Corporate Affairs should immediately takeover the assets of NSEL and other associate companies and godowns and appoint auditors to check the money trail before and after the payment crisis.
There are 24 defaulters who should be made to pay money to investors as soon as possible. The promoter is liable for this crisis and they have to pay all investors who have put in their hard earned money in the exchange. There are around 15,000 investors.
What other action are you taking to force NSEL and its promoters to pay up?
To begin with, we (including other leading brokers and investors) are working on legal options and are advising all our clients to be very careful to do business with any other exchanges floated by the FT group. Already a lot of brokers has reduced their business.