Geodesic gets winding up order from Bombay high court5 min read . Updated: 09 Aug 2014, 01:18 AM IST
In July, an FIR was lodged against the firm after 5 directors were booked in connection with a case of cheating
Mumbai: On 15 December 2005, a Mumbai-based technology company called Geodesic Information Systems made it to business publication Red Herring’s Small Cap 100 list.
Known for innovations like its live Internet TV service called Mundu TV, it was the only Indian firm to be featured that year in the list of the “most competitive, the most innovative and the most promising technology companies in the small-cap segment".
Almost a decade later, the company, that has since changed its name to Geodesic Ltd, is in the process of being wound up by regulators for defaulting on loans.
On 1 August, the Registrar of Companies (RoC) informed BSE Ltd that an official liquidator had been appointed by the Bombay high court to wind up Geodesic.
The RoC notice was posted on BSE on Friday.
When contacted, Kiran Kulkarni, managing director and co-founder of Geodesic, declined to comment on grounds that the matter is sub judice, or before the courts.
The order came after Geodesic failed to deposit $162 million (around ₹ 1,000 crore today) with Citibank NA in a case related to the company’s failure to redeem foreign currency convertible bonds (FCCBs). Geodesic defaulted on its FCCB obligations of $157 million in early 2013.
On 8 July, the Bombay high court extended the deadline for payment of money to 18 July.
“...it is clear that the directors of the company are not only not honest with their creditors but are also not honest with this court. They have on one pretext or the other avoided producing the documents, which this court has called upon them to produce by its orders passed from time to time," Justice S.J. Kathawalla said in his 8 July order.
The company once again failed to comply with the high court order.
The London branch of Citibank had in 2013 moved the Bombay high court to secure the interests of the bondholders.
The bank also obtained a decree from a London court against Geodesic. In a 7 February judgment, the commercial court of the Queen’s Bench Division of the Royal Court of Justice awarded in excess of $171 million to the FCCB holders.
According to the 7 April high court order, the company assured the court that the bondholders should not worry as their interests were fully secured by money ( ₹ 1,000 crore) “deposited" in the accounts of its three overseas subsidiaries.
Geodesic said it held $29.056 million, $92.597 million and $82.01 million in the bank accounts of its three subsidiaries, Emiloto Associated Inc., Zomo Technologies Ltd and Geodesic Technology Solutions Ltd, respectively.
The court, however, said, “...it today seems that there is neither a deposit nor an investment properly so called at least as regards one of those subsidiaries: there is, instead, this loan to another company that is still kept in the shadows."
The veracity or otherwise of the company’s balances in its foreign subsidiaries also found mention in the qualifications issued by the auditors, Borkar and Muzumdar, in the annual report of 2012-13.
As part of the qualifications, the auditors noted, “In the absence of any confirmations in that regard, we were unable to verify the correctness of (the) Company’s Bank Balances including Deposits at their foreign subsidiaries Geodesic Technology Solutions Ltd (GTSL) and Geodesic Holding Ltd (GHL) amounting to ₹ 46,069.50 lac and ₹ 67,713.18 lac respectively nor are we able to verify whether these are free of any encumbrances...as such we are unable to ascertain the recoverability thereof."
Listed in 2001, the once-thriving software company, which provides software for financial products, unified communications and mobile computing, saw its revenue grow from ₹ 9.7 crore in the year ended June 2003 (Geodesic follows a June calendar year) to ₹ 1,162 crore in the year ended June 2012, a compounded annual growth rate of 61%.
It earned fame for the first-of–its-kind, award-winning Mundu TV, radio and messenger app that provided a combination of instant messaging, mobile voice-over-Internet protocol and Internet radio.
During this time of stellar growth, the company also opened new subsidiaries in Hong Kong, Mauritius, Panama City, US, British Virgin Islands and other locations. Geodesic also made several acquisitions in India and overseas.
However, in June 2013, the company’s revenue fell by 67.59% to ₹ 377.39 crore from the previous year, while its net profit dropped 412.32% to ₹ 812.16 crore. The company had to take major write-offs when it failed to meet client obligations, resulting in recasting of accounts for FY12 and FY13, which were published only in February 2014.
Geodesic’s shares, which hit an all-time high of ₹ 284.10 each on 8 January 2008, have also been on a steady decline. On Friday, the stock closed at ₹ 1.99, down 3.4% on BSE, while the exchange’s benchmark Sensex index was down 1.02% at 25,329.14 points. Geodesic is now valued at ₹ 17.98 crore on BSE.
Mahesh Murthy, managing partner at Seedfund, who was an angel investor in Geodesic in 1999 and was on the board of the company till 2007, said the winding-up order against the company was “tragic", as he had been happy with the company till he was invested in it. Murthy exited his investment in 2006.
“Whatever little I know of the business, although I don’t have the details, it is very strong innovative software company that has been brought down by potentially irresponsible derivatives trading done by large banks the company was dealing with," said Murthy.
Kulkarni, who co-founded the firm, is facing a fair share of trouble as well. According, to a 5 July news report in The Times of India newspaper, a police station in Nashik has registered a first information report against five directors of Geodesic, including Kulkarni, for cheating investors of ₹ 720 crore.
Kulkarni was earlier co-founder and director of another offshore IT services firm, Aftek Infosys Ltd (renamed Aftek Ltd), which he left after a 12-year stint. He also served as divisional director of managed services and IT services at Rolta India Ltd. An electronics and communication engineer, Kulkarni has been part of the technology industry for over two decades.
Citibank is not the only bank that has filed a winding-up petition against Geodesic. There are at least 10 other banks and individual companies such as Barclays Bank Plc., HDFC Bank Ltd, Standard Chartered Bank and Simmtronics Semiconductors Ltd that have filed similar pleas against Geodesic.
Public complaints against the company were also sent to capital market regulator Securities and Exchange Board of India (Sebi).
Two such complaints went from V. Krishnaraj to Sebi in April 2013 and August 2013, alleging non-disclosure of material information on FCCB repayments, about the winding-up petition filed before the Bombay high court, and unavailability of subsidiary accounts.
A response to the first complaint, dated 15 April, said the case had been “resolved" by BSE.
“As regards to FCCB redemption, the company has on April 25, 2013 informed that the FCCB redemption process is underway and the Company is aggressively working towards resolving regulatory/restructuring/asset redemption process to ensure redemption is completed at the earliest," said the response sent via Sebi’s online complaints redress system, or SCORES.