Nimesh Kampani Driven out to Dubai: Sid Harth
bademiyansubhanallah
If India's top fund-raiser Nimesh Kampani can be hounded out of the
country by a politician, then freedom of business is a mere fallacy
by RN Bhaskar | May 18, 2009
S earing heat and a crisis-ridden economy make Dubai a very
unattractive place to spend this summer in. Only the most desperate
who find their own territory too hot will go there. And now when
Indians are celebrating the triumph of democracy through a free and
fair election, there is one Indian who has been denied the comfort of
freedom on the flimsiest of charges and driven to the unfriendly
weather of the emirate. It is indeed an irony that the man in question
is one who proved to the world that there can be a successful home-
grown investment bank in India — a service to the nation, if you will.
Nimesh Kampani, merchant banker to the mighty, faces arrest in India.
The windmills of Indian justice have ground and crushed many
innocents, but one would have hardly expected such an influential
banker to share their fate. After all, the richest on the land like
Ambanis and Tatas are his friends. He is a billionaire himself. The
biggest fund-raising deals of recent years have all passed with his
signature. The founder of JM Financial is among the most respected
businessmen in the country.
Missing in Action?
But today, the state government of Andhra Pradesh is hunting him for a
possible arrest in an old case involving a non-banking finance company
that defaulted on its public deposits about seven years ago. The
regime, which has returned to power in the recent elections, is using
Kampani’s temporary association with that company nearly a decade ago
as a ruse to corner him. And Kampani is running out of legal options
to defend himself from what he believes to be a witch-hunt.
“Nimesh is known to me for 35 years. I consider him to be a great
merchant banker, but above all a gentleman,” says Bhupen Dalal,
chairman emeritus of Cifco, an investment management company. This
pretty much reflects the sentiment with which corporate India has
reacted to the Kampani episode. Most of his friends are shocked, but
unable to help him out in a craftily built case of cheating that has
raised a larger question: How long will business remain a hostage to
petty politics?
Kampani’s crime? He was an independent director on the board of
Nagarjuna Finance Ltd., headquartered in the scam-smelling city of
Hyderabad. In 1999, he resigned from the post and three years later,
the company defaulted on repaying deposits worth Rs. 100 crore. It is
at best a case in which the police could have sought Kampani’s
cooperation to investigate the real actors and causes behind the
default. But they went far ahead, using a particularly lethal
provision in their depositor protection law to seek his custody.
Neither Nimesh Kampani nor the representatives of the state government
spoke for this story. Many emails and faxes to AP officials went
unanswered. But insiders who have been following the behind-the-scene
manipulations in this case say the motive of the political masters is
to injure his reputation and cause him discomfort, rather than solve
the Nagarjuna default case. So, a scrutiny of the merits of the case
as well as the curious happenings that led to this episode become
unavoidable.
Fixing Liability
Dalal points out Kampani had made his exit from the finance company
before the defaults began and argues the investment banker is not
liable for what happened later. This surely sounds logical, because
Kampani couldn’t have caused or avoided the defaults that happened
three years after he left.
However, in southern India — where vanishing finance companies are a
common occurrence — state governments have armed themselves with wide-
ranging powers to arrest anybody involved in the management of such
companies, including past and present directors, executive or
independent. A look at the relevant provision of the Andhra Pradesh
Protection of Depositors of Financial Establishments (APPDFE) Act,
shows how potent such powers are. The law allows the state to punish
“every person responsible for the management of the affairs of the
financial establishment… with imprisonment for a term which may extend
to ten years and with fine.”
While it is possible that fraudsters could mismanage companies and
quit them before the beginning of defaults just to evade prosecution,
it is also equally true that innocent people could be subjected to a
witch-hunt by politicians using such laws. That’s why savvy money
managers in Mumbai challenged a similar law in Maharashtra. The Bombay
High Court has stayed its operation.
The other question is how far an independent director can be aware of
the finances of a company? After all, he would depend on the data
furnished by the management. “When provident funds do not get paid, or
when auditors give misleading statements, can independent directors be
blamed?” asks Hemendra Kothari, another leading investment banker. ”If
you want good corporate governance through the participation of
independent directors, all such ridiculous laws need to be changed
immediately.”
The Nimesh Kampani case has coincided with the biggest scam in
corporate India’s history. Satyam. That case, too, has originated in
the same city, Hyderabad. That fraud involves more than Rs. 7,000
crore, but till today, the company’s independent directors during
Satyam’s fraud years (Harvard University professor Krishna Palepu and
venture capitalist Vinod Dham among them) have not been arrested.
The Warning and After
In 1999, the same year as his exit from Nagarjuna Finance, Nimesh
Kampani joined hands with Morgan Stanley to offer a bouquet of
financial services. The joint ventures quickly became a leading player
in India’s market for capital issues and consolidation activity. Two
years ago, the alliance ended and Kampani’s operation became an
indigenous one.
During this journey, he has helped many business houses raise capital
across India. He didn’t realise that one such deal would irritate
someone so much that his freedom could be under peril one day. (See
box in the next column)
Kampani’s real crime, say those in the know, is that he had dared to
finance Ramoji Rao of the Eenadu group. Now, Rajasekhara Reddy, chief
minister of Andhra Pradesh, feels some rivalry towards Rao
Kampani’s real crime, say those in the know, is that he had dared to
finance Ramoji Rao of the Eenadu group. Now, Rajasekhara Reddy, chief
minister of Andhra Pradesh, feels some rivalry towards Rao.
In a burst of coincidences, warnings had been going out to people
against having any business association with Rao. For instance, one
such warning reached the world’s largest private equity firm
Blackstone, which was planning to help Rao out of his financial
troubles. Blackstone did not pay heed, but the deal was eventually
stalled. Kampani, too, got a warning. Like a good investment banker,
he stuck with his client and ignored it.
It was then, sources close to Kampani assert, the state government
used the depositor protection law to issue a look-out notice for him.
Worried he has been targetted personally, Kampani scurried for cover.
That is when the sweltering summer of Dubai felt like Alpine comfort.
In exile, Kampani has launched a legal campaign but things haven’t
gone well so far. The Supreme Court has refused to interfere with the
law (it is the state legislators who must change it) and also refused
him anticipatory bail.
So, what are Kampani’s options? One would be to return to India and
submit to the process of law. It means short-term troubles like being
jailed, but he can hope to get exonerated eventually. The other, of
course, is to “cool” his heels in Dubai and wait for a positive
development. Obviously, Kampani has chosen the latter.
Two reasons are behind the decision. First, there was a chance that
the Congress Party could be voted out of power in Andhra Pradesh. Now
we know it has not happened. The second, Kampani wanted to give
himself time for reconciliation. He would hope that the sweet taste of
election victory may have wiped off the bitterness of the past and the
politicians in question may be open to negotiate.
AT LOGGER HEADS
Ratan Tata vs. Mamata
Ratan Tata’s standoff with Mamata Banerjee cost Tata Motors Rs. 1,500
crore after it was forced to withdraw the Nano project from West
Bengal.
Rajan Pillai vs. Central Government
Facing a 14-year jail-term in Singapore, Rajan
Pillai, former chairman of Britannia Industries, fled to India where
he was jailed by the Narasimha Rao regime in 1995. Two days later on
July 8, he died.
Y S Rajasekhara Reddy at a political rally
Naresh Goyal vs. MNS
When Jet fired hundreds of its employees, they sobbed their way into
the heart of MNS chief Raj Thackeray. He forced Jet chairman Naresh
Goyal to re-hire them.
Lalit Modi vs. Chidambaram
When home minister P. Chidambaram asked IPL commissioner Lalit Modi to
re-schedule the second season of IPL, Modi had to move the whole
tournament to South Africa.
Albert Brunner vs. Deve Gowda
Former Prime Minister Deve Gowda’s allegations on Infosys led to
Narayana Murthy stepping down as chairman of Bangalore International
Airport Limited. BIAL CEO Albert Brunner accused Gowda of lacking
basic courtesy and backed Murthy to the end.
Mukesh Ambani vs. Maharashtra
Mukesh Ambani’s mega special economic zone project in Navi Mumbai ran
into trouble with the Maharashtra revenue department over protection
of villagers’ rights before the elder Ambani sorted matters out.
Reliance Retail vs. Mayawati
Mayawati went after Mukesh Ambani’s ambitious plans to kick-start
Reliance Retail in Uttar Pradesh and forced him to shut down units,
thus ‘safeguarding’ the livelihoods of hundreds of mom-and-pop retail
stores.
Sun TV vs. Karunanidhi
M. Karunanidhi crippled the Sun Network — going after their films, TV
and cable operations — after an unfavourable article in one of their
papers. The real affair was about money. The Maran brothers sweated it
out for two years before patching up with the DMK chief.
The Untold Story of a Witch-Hunt
Nimesh Kampani’s troubles are but a chapter in a long campaign against
Andhra businessman Ramoji Rao, whose group had come under severe
action from the government headed by Rajasekhara Reddy.
Rao’s problems had begun in 2003. Under the local depositor protection
law, the government decided to examine all the records of Rao’s
Margadarsi Financiers “with a view to protecting the interests of the
depositors.” Rao went to court which restrained the state from
attaching or freezing the assets of Margadarsi Financiers and its
allied companies as long as repayments were being made.
To survive, Rao needed money fast, but help was hard to come by
locally. His attempt to get investment from Blackstone was stalled.
The finance ministry at last gave a go-ahead, but with a caveat that
the proceeds would not be used to pay off existing depositors. Such a
condition had seldom been made before.
It was at this stage that Kampani decided to fund Rao. In January
2008, Kampani decided to acquire an undisclosed minority stake in
Rao’s Ushodaya Enterprises Ltd (UEL), a newspaper publisher, for Rs.
2,604 crore. Investments into UEL were made through Equator, a US
hedge fund. And then, Nimesh Kampani received a warning.
Searing heat and a crisis-ridden economy make Dubai a very
unattractive place to spend this summer in. Only the most desperate
who find their own territory too hot will go there. And now when
Indians are celebrating the triumph of democracy through a free and
fair election, there is one Indian who has been denied the comfort of
freedom on the flimsiest of charges and driven to the unfriendly
weather of the emirate. It is indeed an irony that the man in question
is one who proved to the world that there can be a successful home-
grown investment bank in India — a service to the nation, if you will.
Nimesh Kampani, merchant banker to the mighty, faces arrest in India.
The windmills of Indian justice have ground and crushed many
innocents, but one would have hardly expected such an influential
banker to share their fate. After all, the richest on the land like
Ambanis and Tatas are his friends. He is a billionaire himself. The
biggest fund-raising deals of recent years have all passed with his
signature. The founder of JM Financial is among the most respected
businessmen in the country.
Additional reporting by Dinesh Narayanan and T. Surendar
Find this article in Forbes India Magazine of 05 June, 2009
...and I am Sid Harth
dhananjay
> When Jet fired hundreds of its employees, they sobbed their way into
> the heart ofMNSchief Raj Thackeray. He forced Jet chairman Naresh
> Goyal to re-hire them.
narendr goyal himself claimed in new delhi (not in mumbai) that the
decision of sacking people was not through him and he appologised the
employee.
i doubt it had anything to do employee making a agitation in front of
mumbai office of jet in uniforms.
Raj thakre provided moral support for the agitation saying that jet
can consider revising the salary of others so these young who have
taken loans for jobs (pre job training) should not get the shock of
recession.
goyal made changes in the jet somewhere, must have.
> Mukesh Ambani vs. Maharashtra
Mukesh ambani vs india it should be as villagers you refer are
actually farmers and it will be issue all over india when farming land
is sold using govnt GRs under name of national progress. (remember
singoor)
regarding SEZ planning the land acqusition is doubtful as there are
scams in which more alnd is accumulated by corporates to sale later at
larger prices when market around such mega project goes up see how
unknown areas in navi mumbai get rate of 3000-5000 Rs Sq ft.
In navi mumbai and raigadh you will find crorepati farmers doing
rickshaw for timepass.
SEZs should be made on non farming land a common sense isnt it, just
because ambani wants it does not make it right. see how other SEZs in
china are made.
you can very well make SEZ in vidarbh marathwada as there is no
farming possible due to less rain % each year and you are very well
aware that farmers committed suiside for draught.
but these big giants are so conservative in saving production costs
(forget national progress) that TATA when offered landin maharashtr
after lalgadhi rejected them, he said its far away and opted for
gujrath offer as its may be good from business point of view.
so? why should share sympethy with assholes like you.
>
> Mukesh Ambani’s mega special economic zone project in Navi Mumbai ran
> into trouble with the Maharashtra revenue department over protection
> of villagers’ rights before the elder Ambani sorted matters out.
ambani did not sorted matter. its maharashtr state govnt and center as
well which is pushing the project on head of farmers (mind no
villagers). there is good scope for SEZ in rural parts of india than
near already established urban money making points
see how ambani is not making investment in troubled energy sector
related to mumbai, i mean atleast 500Mw capacity need to be added
"right now" instead he is interested in rise in bills where shivsena
had to break the office to cause attention to problem.
Its typical chadiya attitude to make the business out of rising
demands and not solve them by additional capacity to keep prices low
for commodity.
D