Angry NSEL investors accuse India’s Financial Tech of another fraud

Angry NSEL investors accuse Financial Tech of another fraud

Financial Technologies claims it is repaying foreign currency loans, but angry investors in NSEL allege that the promoters are taking money out of the company to pre-empt any adverse regulatory/judicial ruling. Financial Technologies shares touched a 2-month high of Rs 201 this morning after the company said it had sold its entire 100 percent equity ownership in Singapore Mercantile Exchange for USD 150 million.The SMX deal valuation of Rs 900-odd crore has analysts rubbing their eyes in disbelief, considering Rs 292 crore of accumulated loss, FY13 revenues of around Rs 18 crore, and a daily turnover of around USD 200 million.

Arun Dalmia, President of NSEL Investors Forum is questioning FT’s haste to repay foreign currency loans, when they are maturing in 2014 and 2015. In September this year, FT had repaid USD 76 million of foreign loans.

And he is mincing no words.

“It is really surprising the way they have sent USD 90 million. They have sent this USD 90 million to pay the External Commercial Borrowings (ECB) and Foreign Currency Convertible Bond (FCCB), which are due on 2014 and 2015. We are question the money which he is sending – he is showing the FCCB – it is his own money,” Dalmia said in an interview to CNBC-TV18.

And Dalmia’s theory may have takers. From the time fraud surfaced in late July, promoters of Financial Technologies have been publicly denying any liability of both FT and group company MCX to investors in NSEL who have lost money. What initially appeared to have been a payment default caused by a lapse in risk management systems is gradually turning out to be a well-planned fraud.

Former NSEL CEO Anjani Sinha, now behind bars, initially owned up blame for the fiasco, but in a subsequent affidavit, alleged that FT group founder Jignesh Shah was aware of the impending disaster.

Given the murky circumstances, Financial Technologies’s decision to prepay foreign currency loans certainly does raise eyebrows.

But Dalmia could be undermining the credibility of the NSEL Investors Forum as well as his own when he claims that the forum was not party to the recent settlement with one of the defaulters Mohan India, which has promised to repay NSEL Rs 771 crore in a phased manner.

An excerpt from NSEL press release three weeks ago:

“Raja Vishvanidhi Dalmia, New Delhi Convener, NIF, said: “The Mohan India and NSEL agreement is a positive step to bring back investors’ money. NIF Team of Delhi comprising of Mr. Kunal Khaneja, Mr. Kamal Rampuria, Mr. Vivek Bansal, Mr. Vivek Aggarwal and Mr. R K Aggarwal made very good efforts to reach the settlement within a couple of week.”

Interview transcript on page 2

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Below is the verbatim transcript of his interview on CNBC-TV18

Q: Financial Technologies has announced its 100 percent stake sale in Singapore Mercantile Exchange. This would garner about USD 150 million which would be used to retire debt. What are you all doing about this at NSEL Investors Forum?

A: We are really objecting it, it is really a fraud which has been committed by the Financial Technologies and Financial Technologies’ board. They have been fooling us from last 3-4 months. It is really surprising the way they have sent USD 90 million. They have sent this USD 90 million to pay the External Commercial Borrowings (ECB) and Foreign Currency Convertible Bond (FCCB), which are due on 2014 and 2015, so why they are paying it?

Q: What are you doing about it? Have you filed a suit or will you file a suit?

A: We are immediately approaching High Court. We are really also approaching Reserve Bank of India (RBI), Economic Offences Wing (EOW), Enforcement Directorate (ED). We are question the money which he is sending – he is showing the FCCB – it is his own money. You see that 20% share has been increased yesterday. How can it increase – It is all insider-trading.

Q: Why did not you object the earlier USD 80 million which were sent by Financial Technologies Group to overseas company to repay the loan, and as you said the loans are not even due in 2014-15, so I assume this objection should have came in September itself when that first tranche of USD 80 million went out?

A: We have already written a letter to Forward Markets Commission (FMC) and EOW as well as the RBI. We are very seriously going and we are requesting EOW and others that all the board of directors should be arrested immediately. You see the Ravi Seth whose investment was Rs 18 crore and reduced to Rs 3 crore because they all knew the fiasco is taking place in July.

Q: Even NSEL Investor Forum was a party to that settlement with Mohan India – you have in alliance with NSEL had agreed to the settlement with Mohan India so most of these cases are coming up where the settlement is happening in but you never objected the Mohan India settlement or the earlier one as well.

A: There are two things. One, regarding Mohan India settlement, the settlement was done between Mohan India and NSEL and we were just informed that some settlement is taking place. Two, whatever the EOW is doing they are discounting the warehouse charges from the borrowers and that money is used by FT, the entire profit has been used by the FT. EOW is part of the settlement, not the investor forum.

Q: You said that you are approaching the High Court and many other institutions but does the NSEL Investor Forum have a legal recourse in this, can you all be backed legally?

A: Our writ is coming on 25th, in that we are definitely mentioning that this fraud has taken place and we are objecting on 25th writ.