With Reserve Bank of India declaring Vijay Mallya as willful defaulter, another famous industrialist and flamboyant page 3 celebrity, Yash Birla, is still not in the radar of the Central bank. The Group, who's combined market capitalisation has crashed by 92 per cent to mere Rs81 crore in the last four year period and borrowed funds of Rs2,200 crore from several financial institutions and defaulted, is under investigation by multiple agencies for swindling investors and siphoning of funds.
The group, under the name of 'Yash Birla' has 10 listed entities in the Bombay Stock Exchange (BSE), taken huge loans from financial institutions and raised capital from public and then defaulted. According to auditors report, the company has granted loan to three companies covered under the Companies Act 1956 and there are no repayment schedule for such loans.
The income-tax department and the Enforcement Directorate have raised other questions and alleged that funds raised by Birla Power through other means, such as the issue of local and foreign equity, have been diverted. According to reports, during the month of January, the IT department raided at least 20 offices of the group across the country for alleged tax evasion.
With share prices languishing in single digits and many with suspended trade, Yash Birla had resigned as chairman of the companies, perhaps to insulate himself from any legal action. Both, Birla and the group companies are silent about returning money to small investors, as repeated efforts to contact them did not bear any fruit.
Auditors said, "that the company has received notice issued by consortium of banks under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 for non-payment of installments and interest thereon after the due date by the company and therefore all loans accounts became non-performing assets with effective from respective dates mentioned in such notice".
Wikipedia, the free encyclopedia said, "Most companies given below are running losses. The group keeps on borrowing money at high interest rates and then defaults. The companies do not earn much real revenue and the balance sheets are manipulated to deceive investors. Keep away from all Yash Birla companies."
Yash Birla's business comprises 20 companies with the major ones being Birla Cotsyn (India) ltd, Birla Power Solutions, Zenith Birla (India) ltd, Birla Pacific Medspa ltd among others. In the month of January, a series of raids were conducted by the Economic Offences Wing (EOW) of the Mumbai Police, Enforcement Directorate (ED) and the Income-Tax department. The key aides of the group - President Ananth Vardhan Pathak and Managing Director PVR Murthy were arrested on the charges of possession of drugs and not returning investors money. According to reports, both are out on bail as investigations are on.
According to EOW, Birla Power Solutions limited collected around Rs250 crores from investors for its corporate fixed deposit (FD) scheme as the depositors were attracted by the higher rate of interest offered by the company than normal bank rates and by the 'Birla' in the company's name. The company is presently suspended from trading for penal actions.
Meanwhile, the sales of its flagship, Birla Cotsyn, a textile company, have fell consistently for the last couple of years. The company has reported loss of Rs54.55 crore for the financial year ended 31st March, 2014. By early 2012, many of the group companies started defaulting on bank loans. At present, the banks have initiated the process to auction the company's properties to recover their dues. Bankers believe that the group has lost the credibility from its customers, employees and lenders.
The promoter's stake in Birla Power Solutions is only 1.08% and in Zenith Birla is 6.28%. The promoter stake in the flagship company, Birla Cotsyn is around 17%. This shows that the promoter himself has lost faith in his company. According to reports, Yash Birla Group had sold its old South Mumbai property to Nahar Group for around Rs 250 crore recently.
Yash Birla inherited his empire at the age of 23 in 1990, when his father Ashok Birla died in an air crash in Bangalore along with his wife Sunanda. After the death of his parents, the business was run by advisors sent across by his grand-aunt Priyamvada (wife of the late M.P. Birla) and other well-meaning members of the extended Birla family. In 2004, when Priyamvada died, she left the M.P. Birla companies to her accountant and long-time confidant R.S. lodha. Yash Birla contested her will. The matter is still before the courts.
