The bond path to bad corporate governance

Electoral bonds, meant to ensure transparency in funding of political parties, have ended up potentially compromising corporate governance by enabling the flow of funds between companies via various financial arrangements—without limits and without adequate disclosures, data released last week shows. One such opaque arrangement involved the use of small, nondescript group companies as pass-throughs, as the case of Kolkata-based Madanlal Ltd shows.

Madanlal Ltd bought electoral bonds for ₹186 crore. Its website says it’s a part of the MKJ Group and Keventer Group, whose two other companies bought electoral bonds separately worth ₹192 crore and ₹195 crore, respectively. Each of these three companies was among the top 10 buyers of electoral bonds, but none seemed prudently aligned with their underlying businesses’ profits. Madanlal’s extent of disproportion was especially glaring—in 2021-22, its total income was just ₹3 crore.

Its annual reports don’t disclose where the money to buy electoral bonds came from; an email questionnaire sent to the company remained unanswered. What is known is that Madanlal bought its bonds on 8 and 10 May 2019, preceding the last two stages of the 2019 general elections that saw voting for 118 seats, including 17 from West Bengal. A director of Madanlal is Radhe Shyam Khetan, who is also a director in MKJ Enterprises. Data from the ministry of corporate affairs shows that through various companies, or directors therein, links can also be traced to the Keventer Group. With the electoral bond scheme, these connections started mattering more.

Madanlal is linked to the MKJ and Keventer groups—also big donors

Electoral bonds purchased since 12 April 2019 (Ŕ cr)

Latest income (Ŕ cr)

Latest net profit (Ŕ cr)