Is the take-over tycoon from the south, P Rajarathinam, casting his eyes on Andhra Pradesh?
Market sources say he is behind a strategic alliance that the ailing Nagarjuna Finance Ltd (NFL), part of the Rs 1,200-crore Nagarjuna Group, is working out with two Calcutta-based and one Mumbai-based finance companies -- IFB Finance, Johnson and Nicolson Finance of Calcutta and SM Finance of Mumbai.
Nagarjuna Finance, incorporated in March 1982 is in the business of finance, investment and trading, hire-purchase and leasing. It had accepted deposits from the public for periods ranging from 12 to 36 months promising interest ranging from 14-18.5 per cent per annum.
For the past few months it has defaulted in payments to its depositors. At present, over Rs 80 crore is due to depositors from the finance outfit of the largest private sector corporate, the Nagarjuna Group, in Andhra Pradesh.
Since a sizeable amount of Nagarjuna credit is corporate lease finance spread all over the country, the company has been trying for some effective collective mechanism.
The proposed alliance with the two Calcutta-based finance companies and SM Finance of Mumbai could provide such a mechanism. Nagarjuna is also in discussion with a Delhi-based finance company for a similar arrangement. It is stated that these companies share common clients.
Market sources here do not rule out the merger of these four or five companies into a single entity at a later date and maintain that it is here that Rajarathinam comes into the picture.
Nagarjuna Finance had earlier successfully prevailed over the Company Law Board to reschedule the payment of the matured deposits. While the company wanted the repayment period to be rescheduled from 12-48 months, the Company Law Board agreed for rescheduling but cut the period to five months to three years.
The company has pleaded with the Company law Board that it was not able to repay the matured deposits because of various problems including delay in recovery of money lent to clients.
The Company Law Board's permission did not go well with the Reserve Bank of India (RBI). RBI maintained that the company's petition for rescheduling was not maintainable under the Companies Act or the RBI Act.
Moreover, the RBI Act does not contemplate any scheme of repayment, other than in accordance with the terms of conditions of deposits.
According to figures furnished by the company to the Company Law Board, it had 85,000 odd depositors with an aggregate deposit of Rs 98.37 crore, as in the begining of the current calender year.
