Home / Companies / People /  After NSEL, it’s start-up dreams for Jignesh Shah

Jignesh Shah, the founder of Financial Technologies (India) Ltd (FTIL) and main accused in a commodity exchange fraud, is attempting to build two new technology platforms to offer incubation and other facilities to start-ups, after being released on bail in August 2014.

The ventures have angered the investors who lost money in the 5,574.35-crore NSEL scam in 2013. They allege FTIL is channelling funds into new businesses before refunding NSEL investors, and using these ventures to divert funds in contravention of a Bombay high court order. National Spot Exchange Ltd (NSEL) is a unit of FTIL.

While Shah’s formal involvement in FTIL is now limited, he has been mentoring two new group initiatives. These units— JS Innovation Lab and Startup Networkz—have close links to FTIL and are getting funding and other support from the FTIL group.

Shah resigned as managing director in November 2014 and is now mentor at the company.

The launch of JS Innovation Lab was announced in August 2015, when FTIL proposed to change its name to 63 moons. In a press statement, the company said that it will create a laboratory of global standards on the lines of Bell Labs, Google Labs and Apple Labs to explore innovative technology products.

The JS Innovation Lab website says the company provides incubation services to startups.

“Incumbents are given every resource to ensure they can straightaway kickstart the execution of their ideas to turn them into commercially viable businesses. The incubation process is almost ‘plug and play’!" the website says.

But in lieu of the incubation services, FTIL is also picking up 5% equity in the start-up ventures.

“It is known worldwide that when any organization is inspiring and nurturing entrepreneurship, right at the idea level, it’s a norm that 5% sweat equity is given to the organization. In this case, it’s FTIL," said an FTIL spokesperson in an email response.

The website of JS Innovation Lab doesn’t mention any affiliation to FTIL, but the company is operating out of FT Towers in Mumbai, the headquarters of the FTIL group.

There is also no mention of the activities of JS Innovation Lab on the website of FTIL.

According to multiple references to the technology lab in the FTIL annual report for financial year 2015, it is supposed to be in the business of creating patents rather than incubating and investing in start-up ventures.

When asked why the workings of JS Innovation Lab aren’t being disclosed separately, an FTIL spokesperson said, “JS Innovation Lab is not a separate company or entity. JS Innovation Lab is a name given to the dedicated research group within FTIL that drives technology-based innovations."

The second platform that FTIL has put in place is called Startup Networkz, which conducts a series of conferences for start-ups and entrepreneurs. The prime sponsor of this initiative is 63 moons (the proposed name for FTIL), along with a Singapore -based firm Business Excellence and Research Group (BERG). Thomas McMahon, chief executive of BERG, headed the Singapore Mercantile Exchange Pte Ltd, which was part of FTIL’s exchange ventures.

The Registrar of Companies (RoC) had turned down FTIL’s name change to 63 moons. FTIL claims that 63 moons is now a brand owned by the company.

“If you see any advertisement of any conference, it’s either ‘presented’ or ‘powered by’ a corporate brand. BERG is a company in Singapore, which is holding conferences on start-ups across the world, and the brand 63 moons is co-hosting and is principal sponsor of the event," said an FTIL spokesperson in an email.

The FTIL website makes no mention of JS Innovation Lab, Startup Networkz or 63 moons, but FTIL says this is because “a company’s website is not static".

NSEL investor LJ Tanna Shares and Securities filed a motion on 8 March against FTIL in the Bombay high court alleging that proceeds received from the sale of FTIL assets are being channelled towards these initiatives. “The plaintiffs gather that FTIL has now without the permission of court purported to enter into the alleged business of accelerated funding, which is very similar to angel funding and is nothing but another device to siphon off further moneys from FTIL," said the motion, a copy of which is available with Mint.

As part of a 2 September 2014 order of the Bombay high court, FTIL and Jignesh Shah agreed that they would not disburse any amounts received by them from sale of assets for “other than ordinary course of business", which would include payment of dues, maintenance of assets and payment of wages.

When asked whether sponsoring events under Startup Networkz can be construed as ordinary course of business, the FTIL spokesperson said “yes".

“You show me one business where branding, conferences, events are not an integral part of the business—from ‘Salt’ to ‘Software’ to ‘Newspaper’ companies. We hope now that your query is answered," said the FTIL spokesperson in the email.

Apart from concerns raised by investors, experts also wonder whether the ventures make good business sense. Sharad Sharma, co-founder, iSPIRT, a think tank of software product industry is sceptical.

“Incubators are a money losing proposition right now. Even the largest players in India have lost money while providing incubation services. So, it would be interesting to see whether an initiative by FTIL would be able to turn its fortunes around on it or will end up burning cash. As far as providing networking platform that connect angel investors and start-ups (is concerned), they are a late entrant. Bengaluru-based LetsVenture has already emerged as a leader. It will be difficult for FTIL to dislodge the leader, given their lack of experience in this space," said Sharma.

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