Cabinet nod for law to ban unregulated deposit schemes
NEW DELHI: THE BILL PROPOSES TO PREVENT FIRMS WHICH ARE UNAUTHORISED TO COLLECT DEPOSITS FROM PROMOTING, OPERATING, ISSUING ADVERTISEMENTS AND COLLECTING DEPOSITS
The Union cabinet on Tuesday approved the introduction of a proposed law to ban unregulated entities from collecting deposits from individuals in an effort to protect small investors from ponzi schemes.
The Banning of Unregulated Deposit Schemes Bill, 2018, which is likely to be tabled in Parliament in the second half of the budget session starting next month, seeks to plug loopholes in existing laws.
The bill was envisaged after the collapse of Saradha Group in April 2013. Its chairman and managing director Sudipta Sen was arrested after it started defaulting on repayments following pressure on its finances. The government had subsequently constituted an inter-ministerial group to look into such depositcollecting companies that fleeced investors. The cabinet also approved the Chit Funds (Amendment) Bill, 2018.
Comprehensive central legislation is needed to curb illicit deposit-taking schemes and boost the confidence of investors in dealing with financial products, said Abhishek A. Rastogi, a partner at law firm Khaitan & Co.
“The guidelines and legislation should ensure that the activities are regulated so that there are no frauds but at the same time not kill the schemes as the benefits cannot be ignored,” Rastogi said. The cabinet’s decision comes at a time when the government is under pressure following two banking frauds that have recently come to the fore.
The bill proposes to prevent companies which are unauthorised to collect deposits from promoting, operating, issuing advertisements and collecting deposits. It also proposes to make these offences ex-ante. This means that the government won’t have to wait till the fraud comes to light but can act beforehand to stop such soliciting.
The bill also proposes the setting up of a competent authority by state governments with powers to attach properties and recover dues to depositors in case the entities do manage to raise funds illegally.
private equity fund KKR & Co. and Wipro founder Azim Premji’s family office PremjiInvest have joined the race for acquiring stakes in fashion hypermarket chain Vishal Mega Mart, two people aware of the development said.
The retail chain is currently owned by private equity TPG Capital and south India’s biggest conglomerate Shriram Group. While Vishal Mega Mart Pvt. Ltd (VMMPL), owned by TPG, runs the back end operations, Airplaza Retail owned by Shriram Group runs the front-end stores. Kotak Mahindra Capital is advising the sellers.
KKR and PremjiInvest have submitted separate bids for the stake, the two people cited above said on condition of anonymity.
US-based Carlyle Group, a consortium of Kedaara Capital and Partners Group, and online retailer Flipkart are among contenders for Vishal Mega Mart, The Economic Times had reported on February 15.
Spokespersons for TPG, PremjiInvest and Carlyle declined to comment, while emails sent to KKR and Shriram Group did not elicit any response.
If a deal materialises, it would be the first exit for a global private equity fund from an asset that has turned around after restructuring.
The Vishal Mega Mart website claims the company operates over 204 stores in over 110 cities and towns.
In 2011, the company promoted by Ram Chandra Agrawal had run up a debt of ₹760 crore with lenders such as HDFC Bank, HSBC, ING Vysya Bank and State Bank of India. It was acquired by TPG and Shriram Group for a total of ₹70 crore.
According to a Crisil Ratings February 2017 report, TPG Capital had infused ₹669 crore into VMMPL till March 31, 2016. It injected an additional ₹100 crore in fiscal 2017.
Debt levels, though reducing, remained high at ₹324 crore (₹528 crore, including compulsory convertible debentures) as on March 31, 2016, it added.
For fiscal 2016, VMMPL reported a loss of ₹36.2 crore on revenue of ₹1,346 crore, against a net loss of ₹60.3 crore on a revenue of ₹1,108 crore for the previous year.
“The main concern for global PE funds is to find the right domestic partner to meet the regulatory requirements and all the foreign funds are in discussions with local retail companies to form consortiums,” said the second person on condition of anonymity.
MUMBAI:American