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NSEL: May have to Sell Commodities to Return Money, and There are Related Parties


Economic Times has two investigative pieces on NSEL. First, Avinash Celestine hunts down the list of the 24 entities that own money to NSEL. And finds something interesting:

Mohan India is essentially a shell company. In 2011-12, the last date for which its financials were available, the company earned a net profit of Rs 2,044, and had revenues of Rs 72,400. Its balance sheet size was about Rs 17 lakh. Yet Mohan India, along with a sister concern Tavishi Enterprises (which was incorporated this year and whose financials are not yet available) together owe the National Spot Exchange Ltd (NSEL) Rs 952 crore.

A company with revenues of Rs. 72K, owes Rs. 952 crore? Apparently, this money they had “borrowed” from NSEL wasn’t used in any way connected to the business.

And will they return the money? Here’s a hint:

ET Magazine spoke to Balbir Singh Uppal, CMD of Lakshmi Energy and Foods

According to NSEL, group companies related to Lakshmi owe around Rs 689 crore, against stocks of paddy held in a godown in Punjab. "We’ve settled about Rs 240-250 crore worth of dues to NSEL," says Uppal.

"For the remaining amount NSEL will have to sell the stocks and recover the dues," he adds.

That is going to hurt on August 14, or whenever this news actually becomes official.

And worse, in another article, ET mentions some of the people that owe money are related to officials of the exchange:

Interestingly, the company with the second-highest liability is related to the exchange’s chairman Shankarlal Guru, a former MLA from Unjha, now in his eighties.

Nilesh Patel, the managing director of Ahmedabad-based NK Proteins, which has an outstanding liability of Rs 929.9 crore, is the son-in-law of Guru, who had chaired the government-constituted high-powered committee on agri marketing in 1992 and later headed an expert panel on strengthening and developing agri marketing in 2000.

And sadly, NSEL now seems to say the settlement guarantee fund consists mostly of commodities. Which switches back from the “there was only 60 cr.” that the CEO mentioned earlier. (FE)

“The slump in the SGF is a misconception and it’s just the composition that has changed. Since members are also allowed to provide cash, warehouse receipts, FDs or guarantees as margin, some members have provided warehouse receipts instead of cash. So there is around Rs 720 crore in the SGF but the cash component has fallen,” Sinha explained.

There is another new week coming.


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