After Congress MP Undavalli Arun Kumar exposed the Margadarshi Scam, Ramoji Rao suddenly faced severe financial crisis. He has to raise money immediately to pay money back to the depositors of his chit fund company. Except Eenadu, all other group companies were in losses. Ramoji Rao’s effort to mobilise funds from Blackstone failed. At this stage Nimesh Kampani entered the scene. Nimesh Kampani was one of the accused in Nagarjuna Finance scam.Nimesh Kampani worked overtime to bail out Ramoji Rao and involved Reliance in the operation. Within 37 days, six “shell companies” were floated on three addresses. Reliance diverted Rs 2000 crore of its share holders money through the shell companies to Nimesh Kampani’s Equator Trading India Limited. Surprising fact is that within 23 days of Equator Trading India Limited was registered, Ramoji Rao entered into an agreement with the company. Documents were also submitted to Registrar of Companies. Should anyone have doubts on the fact that the shell companies were floated to support Ramoji Rao financially.
Of the Rs 2000 crore of Reliance money diverted through shell companies, Rs 1,424 crore reached Ramoji group. Ushodaya Enterprises incurred a loss of Rs 59.19 crore. Yet, Equator Trading India Limited purchased a share of Rs 100 each at a whopping Rs 5,28,630. In all, 26,930 shares were purchased for Rs 1,424 crore and took 26 per cent of Ushodaya Enterprises. Thus Ramoji Rao was bailed out.
Why Reliance evinced so much of interest in a loss making unit and diverted its share holders money? Who was the person who motivated Reliance to come to the rescue of Ramoji Rao? In return, what did Reliance gain? Beyond doubt, it was Chandrababu Naidu who played a key role.
Following is in detail on how the Reliance money was routed through shell companies.
Rs1424 crore Reliance money illegally flows into Ramoji Rao’s Ushodaya Enterprises Pvt Ltd
*Six Companies floated within 37 days between December 2007 and January 2008
*Reliance Industries Ltd through Nimesh Kampani invested Rs 1424 crore in a loss making company that publishes Eenadu and Etv Network
*Chandrababu Naidu facilitated the deal
*Seirous Fraud Investigation Office should probe the deal
Here is a startling story as to how Chandrababu Naidu got Reliance Industries headed by Mukesh Ambani to invest in Ramoji Group a whopping Rs 1423.86 crore through Nimesh Kampani in 2008. Form 2 dated 30.1.2008 filed by Ushodaya Enterprises with RoC shows shares allotted to Equator Trading Enterprises Ltd at a premium of Rs 5,28,630 per share. Ushodaya is the holding company of media Ramoji Rao, owner of Eenadu Group. Prior to the deal with Kampani, Ramoji Rao owned 99.86 percent of Ushodaya.
So how did Kampani front for Reliance Industries? Well he constructed Equator Trading Enterprises Pvt Ltd and Altitude Mercantile Pvt Ltd. to hoodwink the law.
Reliance Industrial Investment & Holdings (RIIHL) is a 100 percent subsidiary of Reliance Industries. RIIHL is the vehicle through which 10.47 crore (6.66 percent) treasury shares of RIL were held. The RIL Annual Report 2007-08 shows RIIHL as a 100 percent subsidiary. The shareholding pattern of RIL for December 2008 shows the shareholding of the Petroleum Trust. The Petroleum Trust through the Trustees for the sole beneficiary – Ms RIIHL owning 6.66 percent. Since then Mukesh Ambani has extinguished the treasury stock through a buy back which left analysts in a tizzy.
Now RIIHL held the treasury stock through the Petroleum Trust and Nimesh Kampani was the Trustee of the Petroleum Trust. The scheme of Merger of Reliance Petroleum Ltd and Reliance Industries Ltd of 2002 –( Annual Report page no 166 )– shows the provisions of the Trust created for five years. On December 9, 2004, Business Standard reported that Petroleum Trust was not part of the promoter holding in RIL. BS wrote, “Following the amalgamation of Reliance Petroleum with RIL, the shares of RIL were allotted to the trust. RIIHL, being a 100 percent subsidiary of RIL could not hold the shares of the parent company under law. So, the Petroleum Trust was created to house the newly created shares of RIL after the merger. But since the property belonged to RIIHL, it was named the ‘sole beneficiary’implying that all the financial benefits arising out of the ownership of RIL shares would flow to RIIHL.”
When the merger was announced in April 2002, it was stated by then RIL MD Anil Ambani that 12.2 percent (7.5 percent then held by the Trust and 4.7 percent held by RIL associate companies) would be sold to strategic investors, financial institutions or overseas via ADRs or GDRs in five years. The two trustees of the Trust were Nimesh Kampani and Vishnubhai B Haribhakti. But the BSE continues to show the Trust holding as part of promoter holding.
RIIHL formerly known as Trishna Investments and Leasings in turn controls 100 percent equity of Shinano Retail Pvt Ltd. Shinano is held by way of two interwoven and inter-linked companies both held under inter se and RIIHL. Once again the leads are provided by the Annual Returns of Shinano Retail (registration no 176418) which held its first AGM as recently as September 22, 2008. The Annexure to clause V of the Companies Act 1956 details that RIIHL (Maker Chambers IV, 222 Nariman Point) and Teesta Retail (Chitrakoot, Shreeram Mills Compound, Worli) held 5000 shares each in the entity as of 22.9.08. Further, these shares were transferred in the names of RIIHL and Teesta by Reliance Elastomers and Reliance Industrial Enterprises respectively on 28.1.08. The same held good for Teesta Retail as well where RIIHL and Shinano Retail held 5000 shares each and the modus operandi was the same as these shares were transferred by Reliance Elastomers and Reliance Industrial Enterprises.
Now comes the classic RIL twist in the tale. Obfuscation being the core value, Shinano has funded Kavindra Commercials with Rs 1054 crore and an additional Rs 952 crore was given to Devki Commercials through convertible loans. Once again, operating through a maze of transactions, both Kavindra and Devki are held inter se and also through inter woven companies namely Teesta and Shinano, accordingly fully held by RIL through its subsidiary. Form 18 of Kavindra and Annual Return dated 26.9.08 of Devki clearly show their addresses as 84A Mittal Court, Nariman Point which are addresses of other Reliance owned entities used to make investments in media companies. Interestingly, schedule I, point number 8 in Annual report of RIIHL (wholly owned subsidiary of RIL) shows Shinano and Teesta as Associate companies from January 28, 2008.
The trail gets stronger when one gets to the balance sheet of Shinano for 2007-08 where schedule D, point number 5 in the notes to accounts shows loan of Rs 1054 crore from Shinano. Similarly the balance sheet of Devki for 2007-08 schedule B, point number 5 in notes to accounts shows loan of Rs 952 crore. Shinano lent an aggregate amount of Rs 2006 crore. Of this Rs 1054 crore is given to Kavindra and Rs 952 crore to Devki. The Annual Returns of Kavindra and Devki show the inter woven shareholding along with Shinano and Teesta.
It is here that Nimesh Kampani is rewarded for his loyalty by Mukesh Ambani. Remember that Kampani was the valuer during the family settlement between the two brothers presided over by the mother. Kavindra then diverted Rs 1054 crore received from Shinano to Altitude Mercantile and Equator Trading through debentures. Now the case gets curiouser. Altitude and Equator are owned privately by Nimesh Kampani. The balance sheet of Kavindra for the year 2007-08, schedule C shows investment of Rs 99.99 crore in debentures of Altitude and investment of Rs 954 crore in debentures of Equator. Devki did likewise, a mirror image of the transaction where it diverted rs 952 crore received from Shinano to Altitude and Equator through debentures. The balance sheet of Devki 2007-08 schedule C shows investment of Rs 100.49 crore in debentures of Altitude and investment of Rs 850 crore in debentures of Equator.
Form 2 filed by Equator Trading Enterprises shows allotment of 1,999,900,000 shares to Altitude Mercantile with 141, Maker Chambers 111, Nariman Point on January 30, 2008, making it a subsidiary. Similarly Form 18 and 32 of Altitude and Equator shows a common address as are the directors on the boards of the company. The crucial link then is Form 2 dated 29.1.2008 filed with the Registrar of Companies by Altitude which shows Kampani Properties and Holdings Ltd (holding 40 percent of the equity) and JM Assets Management holding 15 percent of the equity.
Altitude has used Rs 200 crores received from Kavindra and Devki to acquire equity shares of Equator. Altitude is having a paid up share capital of only Rs 1 crore. Form 2 filed with RoC shows shares allotted to Altitude. If your head is spinning with these names, then the objective has been achieved, for this veritable maze has been deliberately created to confuse the trackers. Equator then used Rs 1424 crores received from Devki and Kavindra to acquire 26,930 equity shares of Rs 100 each at a premium of Rs 528,630 per share of Ushodaya. Once again the paper trail gives the evidence. Since government of India makes it mandatory to make these filings, all this is recorded for posterity.
Form 2 dated 30.1.2008 filed by Ushodaya with RoC shows shares allotted to Equator and premium of Rs 528,630 per share paid. Ushodaya is the holding company of media baron Ramoji Rao who is the owner of Eenadu Group. Prior to the deal with Kampani, he owned 99.86 percent of Ushodaya.
The moot point is that Mukesh Ambani’s octopus like tentacles across the media vector have not been understood by the common man. By enveloping Eenadu, he got a major foothold in the powerful regional media which was important for his retail plans at that point in time. He has also been fighting a legal battle with his brother on KG Basin gas and print and television mouthpieces would only add to his clout to spread disinformation. The idea at all times being to control without coming to the fore. By using his enormous financial clout he has managed to grab several entities. The question is whether they are the right vehicles in this age of fragmented and diffused media.
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