Sucheta Dalal :Prithvi: No Disclosures
Sucheta Dalal

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Prithvi: No Disclosures  

July 28, 2009


Sometime in the middle of June, a leading television channel reported that Deutsche Bank had filed a first information report (FIR) against the promoters of Prithvi Information Solutions of Hyderabad, accusing it of a Rs40-crore fraud. The Bank apparently believes that Prithvi, an IT consulting firm, has diverted the money lent to it for real estate and also lied about having some marquee clients. According to CNBC, Deutsche Bank’s New York branch received letters from three of Prithvi’s ostensible clients —StarPoint Solutions LLC, Johns Hopkins Hospital and T Mobile —that they had no business with the company. When asked by the channel, the company offered no explanation beyond saying that it had ‘refuted all the allegations’.

Interestingly, Deutsche Bank remains extraordinarily tight-lipped about the FIR, which has apparently been filed in Bengaluru. But Prithvi is a company listed on the Bombay Stock Exchange (BSE) and, if the disclosure requirements under the listing agreement were being followed, the company ought to have filed a statement about Deutsche Bank’s charges, as well as its refutation with it. Instead, there is nothing.

A whole month after the revelation, BSE’s website has no information and the regulator seems unaware of the intense discussion and scandalous revelations on various message boards. What we know is that Prithvi’s auditor—Price Waterhouse—has resigned without signing the balance sheet; Ernst & young was the earlier auditor. At the time of going to press, it was to hold an EGM on 23rd July to appoint a new auditor. Shouldn’t the resignation of PWC (disgraced by the Satyam scandal) have rung alarm bells at SEBI and the BSE? There is only silence. Also, since there is no statutory database where companies have to report information, there is no easy way for a diligent investor to check out these facts (SEBI started a database called EDIFAR which is defunct and has never been revived).

According to a message board item, Prithvi was raising money through bill discounting, by pledging future cash flow for work done for several marquee foreign clients. When it failed to pay on schedule, the Bank allegedly contacted the customers and learnt that they had no business with Prithvi. If true, there is a serious issue of fraud in falsification of invoices, but Prithvi is not talking and the regulator is not questioning it either. There is also an allegation that the promoters have pledged most of their shareholding. Interestingly, despite these revelations, Prithvi’s share price has moved in a band between Rs65 and Rs50 in the period between 15th June, when the allegations became public, and 22nd July. 

-- Sucheta Dalal