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Comprehension Text for Nov 2020 (Winter) IIMU -NDPH-3rd year Term 2 Homework assignments
Anugrah lured investors with returns of 20% per annum (Part-1)
Oct 08, 2020, 07:02 PM IST
Sometime around 2017, a fund manager received an interesting query from a friend who had invested with Teji Mandi, an associate of Anugrah Stock and Broking Pvt Ltd. The friend had put in money into a Teji Mandi product in 2014, which had given 45% returns annually over the past three years — an investment of around INR10 lakh had become INR30 lakh. This was surprising, given that the Nifty 50 had remained flat, moving hardly 9% during the same period. It was also the time when the markets went through a volatile phase after demonetisation and Donald Trump became the POTUS. The fund manager advised his friend to get out as the returns were unrealistic. The friend heeded, and thus escaped what was going to follow. Anugrah Stock and Broking and its associate companies — Teji Mandi Analytics and Om Shri Sai Investments (OSSI) — have duped 40,000 investors to the tune of INR1,400 crore. The broking firm lured investors with assured returns to the extent of 1.3% per month or 20% per annum. The scheme had occupied much mindshare in social media. So, how was it going to fulfil its promise? The method may surprise you.
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The modus operandi : The idea of the investment product was to give returns to existing investors by getting new money or by selling options in the derivatives market and make up for the shortfall. The scheme kept attracting investors as in many cases they were getting cheques that sometimes exceeded the 1.3% benchmark every month. These investors spread the word among their friends, and more joined. They became a source of funding for Anugrah to keep its existing investors happy. According to a Mumbai Mirror report, the losses started piling up after the Securities and Exchange Board of India’s (Sebi) October 2019 proposal on pledging client shares by brokers. Speaking to ET Prime, a few investors said they stopped receiving payments only after March this year. One possible explanation could be writing put options in March, on the hope that markets would go up further and losses could be curtailed.
Instead, the markets fell by 40% in March and the put options were exercised. This meant huge losses, and hence the monthly interest payments had to be stopped.Now, a case has been registered against Anugrah’s CEO Paresh Kariya for cheating, and investors are giving their statements. Promoters in a soup As per the information available on the Ministry of Corporate Affairs (MCA) website, Paresh Mulji Kariya and Sadhana Paresh Kariya are the directors and promoters of Anugrah. As of FY19, while Sadhana Kariya was holding a 59.11% stake in the company, Paresh Kariya was paid more. The cash margin decreased in FY19 and the brokerage and commission received totalled up to INR34.70 crore. Under the ‘income from trading in capital markets’ head, there was a loss of INR10 lakh, which is not permissible. “A broking company is allowed to generate revenue or income from broking services. Promoters/directors of the broking firm can generate income in the capital markets in their own proprietary accounts/PAN cards but not in the books of the broking house,” explains Manish Hathiramani, proprietary index trader and technical analyst at Deen Dayal Investments.
Anugrah lured investors with returns of 20% per annum (Part-2)
