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Tata Finance arm raised huge ICDs

Rakesh P Sharma

Till November last year, Inshaallah Investments Pvt Ltd, a Tata Finance associate company, had a paid-up capital of just Rs 200. And with this small equity base (its authorised capital was to the tune of Rs 100,000), the investment company took huge loans and invested huge sums of money in the shares of Tata Finance and Global Telesystems.

The company was floated by Dinesh Bahl, an internal auditor of Tata Finance and other Tata companies in 1994-95. According to Tata sources, Dilip S Pendse, the former managing director of Tata Finance, was instrumental in buying Inshaallah in 1999.

The Tatas seem foxed as to why the company was bought in the first place, but surmise two things: First, they think that Pendse wanted to use this company for buying Tata Finance shares from the Tata group companies, the idea being to protect the prices of Tata Finance.

The price of Tata Finance shares would have dipped if the shares were unloaded by the Tata companies in the open market. Secondly, the Tatas suspect that the company was acquired as a vehicle for the former management team to play the markets.

By March 31, 2001, the Tata group's exposure to this company was to the tune of Rs 720 million, through inter-corporate deposits. With a holding of 22,67,400 shares of Tata Finance, Inshaallah is also the company's third largest shareholder.

Inshaallah also had equity investments of Rs 27 million in Global Tele as on March 31, 2000. It has investments in two little known companies, Avantel Softech and Sibar Software too.

Tata sources said even though Inshaallah was a Tata Finance associate company, it was not run by the Tatas. "It was conceived, operated and run by Pendse and his team," said Tata sources.

Others, behind the company were B R Gazdar, L Shilotri and P Karyekar. The Tatas have filed a FIR against all the four former Tata Finance officials for criminal breach of trust and fraudulent activities.

In 2000-2001, Inshaallah posted a loss of Rs 268 million, a trading loss of Rs 182 million and investment losses of Rs 34 million. Its accumulated losses as on March 31, 2001 were to the tune of Rs 271 million.

In November 2000, the Reserve Bank of India turned down Inshaallah's application for registration as a non-banking finance company. At present, Niskalp Investments & Trading Company, the erstwhile Tata Finance subsidiary holds a 48 per cent stake in Inshaallah.

Inshaallah's other shareholders are Tata Investment Corporation (20 per cent), Camelot Enterprises (20 per cent), Jasper Industries (11.9 per cent), with the remaining shares being held by the directors.

The Tatas say that they have no idea who controls Camelot and Jaspar.

Inshaallah had unsecured liabilities to the tune of Rs 116 million on March 31, 2000. Of this, Rs 110 million were funds taken as ICDs. It also had Rs 104 million as a credit bank balance with schedule banks. The company had clocked a total income of just Rs 10 million for the year-ended March 2000.

In November last year, the authorised capital of the company was raised from Rs 100,000 to Rs 25 million.

Subsequently, on March 22, 2001, the company changed the articles of association and the authorised capital was further raised to Rs 150 million (5 million equity shares of Rs 10 each and 1 million preference shares of Rs 100 each).

Prior to that, on January 29, 2001, the company passed a resolution to enter into the business of generation, transmission, sale, supply and distribution of electricity in India and abroad by setting up wind power plants.

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