SFIO smells a rat in Rose Valleys books

SFIO is probing Rose Valley and is looking into a web of intra-group transactions including loans to Gautam Kundu.

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The Serious Fraud Investigation Office SFIO probing Rose Valley Hotels amp; Entertainment RVHE is looking into a web of intra-group transactions including R207-crore loans to promoter Gautam Kundu in 2011-12,sources said. The company reported a loss of R468 crore on revenues of R24 crore in the same year. The firms annual report for 2011-12,retrieved from the Registrar of Companies RoC website,shows the loan to Kundu under the head transaction to related parties. Rose Valley is under the scanner for allegedly collecting money from small investors,violating statutory norms.

Under the same head,there is also a loan of R378 crore given to the holding company Rose Valley Real Estate Constructions. Interestingly,in the holding companys annual report for 2011-12,there is no mention of a subsidiary company. The profit and loss Pamp;L account of RVHE,for 2011-12,shows a miscellaneous expenditure of R489 crore.

Data from the 31 registered companies of the Rose Valley group show that it has liabilities in excess of R5,230 crore the bulk of it shown as other current liabilities. A recent report by the ministry of corporate affairs MCA showed that Rose Valley real Estate Construction had raised money by issuing non-convertible debentures NCDs to a large number of persons but did not get the debentures listed on recognised stock exchanges. The matter was reported by the Securities and Exchange Board of India Sebi to the RoC.

Media reports have quoted Sebi officials as saying the the West Bengal-based Rose Valley Real Estates Constructions had raised R1,270 crore from investors. Moreover,RVHE,which was shut down by the Jharkhand government last year,had raised more than R2,900 crore.

In order to pacify agitated investors,the Rose Valley chairman reportedly wrote to West Bengal chief minister Mamata Banerjee,claiming that it was solvent with assets of R10,000 crore.

A look at the balance sheets of group firms reveals tangible assets physical assets like land,plant and machinery,office buildings,etc and cash and bank balances of around R2,400 crore,an amount smaller than the liabilities of R5,230 crore.

It is not immediately known whether there have been additions to these assets in 2012-13.

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While quoting the figure of Rs 10,000 crore,the management appears to have taken into consideration loans and advances to 29 group companies from the groups two largest companies Rose Valley Hotels amp; Entertainment Ltd and Rose Valley Real Estates Constructions Ltd RVRECL the companies which were collecting money from investors. RVRECL had a negative net worth of Rs 611 crore at the end of March,2012,according to MCA.

According to media reports,the market regulator had issued a restraining order against Rose Valley in 2011,but says the group has used delaying tactics and court battles to stall action while it continues to raise money from depositors.