Paradise Papers: When Moily was Minister, offshore firms invested in son’s companyhttps://indianexpress.com/article/india/paradise-papers-when-veerappa-moily-was-minister-offshore-firms-invested-in-son-harsha-moily-company-4924166/

Paradise Papers: When Moily was Minister, offshore firms invested in son’s company

Harsha Moily’s firm received investments from subsidiaries of Unitus Group to promote microfinance measures

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Appleby reports show that Mauritius-based Unitus Impact PCC — the company was incorporated by Appleby as a Protected Cell Company in February 2012 — has only one shareholder, Unitus Impact Partners LLC.

IN THE years when Veerappa Moily was Union Minister in the UPA Government, his son Harsha Moily floated a firm which received investments from subsidiaries of the Unitus Group, a clutch of funds to promote microfinance. Unitus Group has several investment vehicles including funds such as Unitus lab; Unitus Equity Fund; Unitus Capital; Unitus Seed Fund and Unitus Impact, registered in Seattle and Bangalore.

Appleby reports show that Mauritius-based Unitus Impact PCC — the company was incorporated by Appleby as a Protected Cell Company in February 2012 — has only one shareholder, Unitus Impact Partners LLC.

The PCC has two cells: Kinara Unitus Impact Partners — till 2014, it had not begun to transact and its shares have not been subscribed; and, MYA Unitus Impact Partners, which has invested in Harsha Moily’s company, Moksha-Yug Access Private Limited. An Appleby report notes that its sole subscriber to the shares of the cell is UIP MYA LLC.

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A March 2012 “client screening check” by Appleby states that Harsha Moily has been listed as a PEP (politically exposed person) since his father was (then) the current Union Cabinet Minister for Corporate Affairs.

Notarised records that form part of Appleby data show Harsha Moily (in 2012) holds 37.24 % of the Moksha-Yug Access India Private Limited shares (31.97 lakh); Mauritius Unitus Corporation holds 26.33% of the shares (22.61 lakh); Vinod Khosla 17.37% ( 14.92 lakh shares) and the MYA Employee Stock Trust 7.29 % (6.26 lakh shares).

According to the company’s website, besides Harsha Moily, the firm’s investors are Unitus Equity Fund, an equity fund affiliated with Unitus Inc; Khosla Impact Fund, founded by Vinod Khosla and Mark Straub and Unitus Impact, a venture capital firm that invests in companies building supply chains and distribution systems aimed at the working poor. In Appleby records, this is the background of Moksha-Yug Access Private Limited: “The Company is engaged in the rural supply chain solutions business. It involves organising the rural producer base, establishing the procurement network in rural areas and establishing market linkages with downstream players in the value chain.”

EXPLAINED: Why the Paradise Papers matter

Appleby data reveals that while MYA Unitus Impact partners has just one shareholder — UIP MYA LLC — this shareholder in turn has a share subscription agreement with Unitus Impact PCC in March 2012, thereby completing the chain. The 2014 compliance report notes how, “a share subscription agreement dated 15th March 2012 could be seen between Unitus Impact PCC and UIP MYA LLC. However, no resolution approving this agreement could be seen…” Also that, “no verification of BO (beneficicary owner) and Declaration of Source of Funds Form could be seen for UIP MYA LLC” and that no proof of investments could be seen.

While MYA stands for Moily’s company’s name Moksha Yug Access, it is important to note that all the companies linked to the Unitus Impact PCC have the name MYA in it. Appleby documents show that Unitus Impact PCC passed a written resolution and established a Cell 1 account for the purpose of investing in shares of Moksha Yug Access and according to an agreement dated March 15th, 2012, the shares were purchased for $ 736,270 by Unitus Impact MYA LLC.

Even as there are 14 shareholders in UIP MYA LLC, the July 2014 compliance report states that the shareholders’ percentage shareholding is very minimal and thus hints towards unnamed individuals or entities that own majority shareholding. While documents suggest that the money was to be invested in India, the compliance report seeks an undertaking from the promoter stating that the company, Unitus Impact PCC will not be using funds sourced from India.

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Appleby records flag his Congress connection — and his ‘rejection’ by the party.

Response from Harsha Moily:

Having founded MYA and led the company as its CEO since its inception in 2005, I have seen MYA experience growth as well as face significant challenges in operating an impact business in rural India. The dairy/ agri space is extremely volatile, but it is a critical sector for rural India and we worked hard to make our business model work.

MYA has always had a farmer-first approach, and our objective has always been to ensure that our dairy farmers be benchmarked with the best in the world in terms of productivity (quality and quantity of milk per cow) and that economic growth be balanced with human progress. With this primary objective, it was imperative that MYA raise external investment from professional investors in the impact investment space including by Unitus Impact PCC – MYA UIP, the investment vehicle set up by Unitus Impact to make investments into MYA (they led an investment round in 2011). Please also note that we have raised capital from a range of other professional institutional investors such as Unitus Equity Fund and Khosla Impact (both of whom originally invested in 2008) through their investment vehicles, with much of the overall equity investment into MYA having started even before my father became a Union Minister in UPA II.

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Investments into MYA by all investors and my own shareholding are in the public domain and relevant filings have been done with Registrar of Companies and the Reserve Bank of India. The funds were used by MYA in implementing a difficult, but important, business plan in the dairy business and in compliance with all applicable laws. Annual filings (including audited financial statements) by MYA have also been periodically made with the concerned regulatory authorities, and the same is available in the public domain.

A personal note. My father being a prominent politician, and a man whose integrity I have always been proud of, it’s not surprising that I would be labeled as a Politically Exposed Person (PEP). However, he has never been involved or interfered in the management, operations or fund raising activities of MYA. MYA has been a professionally managed company following standards of corporate governance and transparency. Engaging with the dairy farmer every day (sometimes multiple times) has been one of the most fulfilling things I have done – and certainly one of the most important economic and emotional connections I have ever had with rural communities.

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As a final thought, I would reiterate that, apart from investment capital received from professional institutional investors (who invested in different rounds after independently conducted due diligence on the company by quality legal an accounting firms), MYA has no association with any offshore entities. The fact that my father was a Union Minister in 2012 has no correlation with MYA securing investments from Unitus Impact. The investments have come from Unitus Impact (and indeed other investors) based on their assessment of MYA, the opportunity and their investment philosophy.

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