Media firm Bennett, Coleman & Co. Ltd (BCCL) invested in companies of Mehul Choksi-promoted Gitanjali Group, which is now under the scanner of probe agencies in connection with the Punjab National Bank transactions fraud allegedly involving three firms of the group, according to documents accessed by The Indian Express.
The documents show that another media group, HT Media Ltd, was in talks to invest in Gitanjali Gems Ltd and the jewellery firm had even received approval from its shareholders to allot debentures to the media firm on December 1, 2017, according to a filing with the BSE Ltd.
According to the documents, the BCCL, which runs The Times of India and The Economic Times, has been allotted five convertible warrants of Rs 32.5 crore in each of the two subsidiaries of Gitanjali Gems Ltd, Nakshatra Brands Ltd and Gili India Ltd, according to board resolutions of these firms of August 2017 and October 2017 respectively.
In the case of listed news firm HT Media Ltd, which runs Hindustan, The Hindustan Times and Mint, Gitanjali Gems Ltd had received approval from members of the company to allot ten fully convertible debentures (FCDs) worth Rs 30.67 crore to HT Media, according to a special resolution of the company on December 1, 2017.
However, in response to queries from The Indian Express, Piyush Gupta, chief financial officer of HT Media, said the company did not invest in Gitanjali Gems although it had “evaluated” and “regulatory filings were done” for the allotment.
“HT Media has not invested in these companies. It was evaluated, regulatory filings were done, but was never executed,” Gupta said in a statement.
Emails to Raj Jain, chief executive officer of BCCL, and phone calls to his office did not elicit any response.
On January 31, two months after the December 1 board resolution, the CBI booked Choksi, diamantaire Nirav Modi and his wife Ami and brother Nishal in connection with a Rs 280-crore cheating case after receiving a complaint from the PNB. Subsequently, the state-owned lender, in a regulatory filing on February 14, revised the amount of fraudulent transactions to Rs 11,400 crore.
It is not illegal for a company to issue convertible warrants or debentures. Companies issue such instruments from time to time to raise money from investors.
“The warrants shall be convertible (at the sole option of the BCCL) at any time within a period of five years from the date of allotment… BCCL shall, on the date of allotment of warrants, pay an amount equivalent to 10 per cent of the total consideration per warrant,” said the terms and conditions of the allotment by both Nakshatra Brands and Gili India.
The board resolutions also said that if BCCL does not convert its warrants in the two companies within 59 months from the allotment date, Nakshatra Brands and Gili India will pay BCCL Rs 38.5 crore each when the warrants are surrendered.
Gili India, in its explanatory statement to the allotment of warrants to BCCL, said “the object of the issue is to mobilize funds to meet the short and long term financial requirement, general corporate purpose and brand building”.
Gitanjali Gems, according to its December 1 special resolution, said that against each FCD, HT Media will “be entitled to apply for and seek allotment of equity shares, at its option, within period not exceeding 18 months from the date of issue” of the FCD.
“The object of this issue is to mobilize funds to meet working capital requirements and general corporate purpose,” Gitanjali Gems said in its explanatory statement on the issue.
Gitanjali Gems is a listed firm of the Gitanjali Group. The company reported a consolidated profit after tax of Rs 65.6 crore for the third quarter ended December 2017. Nakshatra Brands and Gili India are subsidiaries of Gitanjali Gems.
The market capitalisation of Gitanjali Gems has almost halved from Rs 693 crore to Rs 360 crore since February 14 when PNB first alleged that the firms of Choksi and Nirav Modi were involved in fraudulent transactions worth Rs 11,400 crore.