Court clamps curbs on plantation firms

The court, in an interim order, has directed that all plantation companies, agro companies and companies running collective investment schemes should get themselves rated from credit rating companies approvedby SEBI. “The companies should also furnish list of their assets and liabilities. The company should also furnish list of their present directors along with details of their assets including date, cost and present value of acquisitions,” said the SEBI notice issued on October 16.

However, the high court order will not come in the way of companies intending to refund the money to their investors.

It may be recalled that hundreds of plantation companies had collected funds from the investing public in the last three years. Most of these companies were floated by fly-by-night operators and some have already downed shutters, leaving investors high and dry.

Although market sources estimate that over 4,000 plantation companies are registered with the Registrar of Companies, only 591 companies have registered with the SEBI, the regulator for such companies. None of these companies have procured an `investment grade’ from rating agencies.

Investors Grievances Forum, a Mumbai-based association, has estimatedthat nearly Rs 10,000 crore of an estimated four lakh investors have lost in the plantation companies. With the government dilly-dallying in the initial stages, plantation companies floated new schemes to pay off maturing deposits. Some companies also later questioned the authority of SEBI to regulate plantation companies.

The fall of Anubhav Plantations floated by C Natesan has created panic among investors. Anubhav which was considered as a well-run company till recently has defaulted on its commitments and its chairman is under judicial custody in Chennai.

In fact, Crisil and other rating agencies had given `Grade V’ rating to plantation companies, indicating high uncertainty that such schemes will provide the assured returns in the form of produce and/or cash. “The ratings indicate the high operational and market risk associated with the short track record of cultivation in India, the substantial dependence on interest arising out of loans and advances in order to meet recurring operational expensesin future and the short track record of the company in the plantations business. The rating also factors the fact that the company has not promised and intermediate returns to its investors,” Crisil said.