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Business News/ Companies / News/  Govt questions fund-raising move by Kings XI Punjab sponsor
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Govt questions fund-raising move by Kings XI Punjab sponsor

Legitimacy of recently concluded `598 crore private placement by NVD Solar has come under government scanner

NVD Solar was the title sponsor of Kings XI Punjab, with its logo prominently displayed on the team jersey, in the edition of the IPL that ran from 3 April to 26 May. Photo: Hindustan Times (Hindustan Times )Premium
NVD Solar was the title sponsor of Kings XI Punjab, with its logo prominently displayed on the team jersey, in the edition of the IPL that ran from 3 April to 26 May. Photo: Hindustan Times
(Hindustan Times )

Kolkata: A Kolkata-based firm that sponsored Kings XI Punjab in this year’s Indian Premier League (IPL) cricket tournament is looking to raise up to 214.76 crore through fixed deposits on the strength of its recently concluded 598 crore private placement of shares, the legitimacy of which has come under the scanner of the Union government.

The company, solar equipment maker NVD Solar Ltd, was the title sponsor of Kings XI Punjab—with its logo prominently displayed on the team jersey—in the edition of the IPL that ran from 3 April to 26 May.

NVD’s regulatory filings with the Registrar of Companies (RoC) show that on 30 March, it allotted shares to 112,965 people to ramp up its equity capital from 2 crore to 600 crore.

However, under the Companies Act, firms cannot sell shares to more than 49 people at a time, except through a public issue. For every such share sale through private placement, a company needs the approval of its shareholders.

NVD’s private placement of shares is significant because of the firm’s proposed fixed deposit scheme—it would not have materialized unless the company had shored up its equity capital.

Under the Companies (Acceptance of Deposits) Rules, firms can raise through fixed deposits up to 25% of equity capital and free reserves from the public. An additional 10% can be raised from shareholders.

Saibal Hazra, NVD’s managing director, said in a phone interview that the shares were sold “over a length of time" and not at one go, although its RoC filings clearly state that there was only one placement.

Hazra refused to respond by email to Mint’s questions, only agreeing to answer a few questions on the phone.

Amandeep Singh, private secretary to Union minister for corporate affairs Sachin Pilot, said on Wednesday that he will brief officials about NVD’s share sale and the proposed fixed deposit scheme. He said he will apprise the minister, too, about the company’s fund-raising plans.

Karvy Computershare Pvt. Ltd is the registrar to the fixed deposit scheme. Asked if it had any responsibility to vet the legitimacy of the scheme, Karvy said in an emailed statement that its role was restricted to “processing of applications".

The money received by NVD from the share sale has almost entirely been invested in associate companies, including NVD Entertainments Ltd, NVD Infotech Pvt. Ltd and NVD Tea and Plants Ltd. Not much is known about the business interests of these firms.

These are described in the company’s balancesheet for fiscal 2013 as “non-current investments" and add up to 595 crore.

NVD has appointed Kolkata-based Aimco Group to sell its fixed deposits among retail investors across India. In its presentation to the distributor, NVD said it would use the cash raised through the scheme to scale up its manufacturing capacity.

Vijay Kumar Dhanuka, business development officer of Aimco Finex—the Aimco Group’s arm for equity and currency trading—said NVD would be paying a distribution commission of 3%.

Aimco has tied up with some 500 agents across India to distribute the fixed deposits across India, he added.

The company, which in fiscal 2013 posted a cash profit of 18.7 crore on revenue of 78.37 crore, is looking to take in money through deposits maturing in one-three years, offering up to 12% in annual interest.

NVD has been mobilizing funds from the public for some time now, said people who have acted as its agents.

Securities issued by it were perceived by investors as risk-free, but after the government started cracking the whip on deposit-taking firms earlier this year, these securities were expressed in the balancesheet for 2012-13 as equity capital, they said, requesting anonymity.

Hazra denied that NVD had ever mobilized any deposits at all in any form.

However, on a visit to his office a year ago, Mint’s journalists had noticed an announcement saying NVD would send its agents on holidays abroad under an incentive scheme for achieving deposit-raising targets.

Kings XI Punjab, meanwhile, is looking to initiate legal action against the NVD group to realize the fee that it had committed to pay the IPL team to become one of its key sponsors in the sixth edition of the tournament held in April-May this year.

NVD agreed to pay Kings XI Punjab a little over 14 crore, and full payment of the contracted amount was to be made by end of March—before IPL-6 got under way, according to a person familiar with the arrangement.

But NVD has so far paid only about 40 lakh in two tranches, this person said, asking not to be named. Though payment wasn’t made, Kings XI Punjab carried NVD’s logo on its jersey for the entire length of the tournament.

The agreement was to be between the IPL team and an Indian unit of the NVD group, but at the request of the latter, Kings XI Punjab eventually signed the sponsorship deal with an NVD group firm incorporated in Bangladesh.

“NVD’s management says it will clear the dues, but no one knows when, or if ever at all," said the person cited above. Kings XI Punjab is now planning to initiate both civil and criminal cases against NVD and its management.

Kings XI Punjab’s management refused to comment on its alleged spat with NVD.

NVD’s Hazra dodged questions on the dispute, saying that an entity in Bangladesh had agreed to sponsor Kings XI Punjab and that it was in no way related to the Indian outfit’s proposed fixed deposit scheme.

Aman Malik in Delhi contributed to this story.

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Published: 03 Oct 2013, 11:52 PM IST
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