Customers of some of the biggest names in the Indian broking fraternity who aggressively sold NSEL’s borrowing-lending racket are staring at large outstanding in NSEL. Clients of Anand Rathi Commodities stand exposed to over Rs600 crores while those of Indian Infoline stand to lose over Rs300 crore
The National Spot Exchange Ltd (NSEL) scam is starting to take an ugly turn for retail investors and high net worth individuals (HNIs) who had ‘invested’ through member-brokers into the borrowing-lending racket being run by the Exchange. As is now known, NSEL was an operation to channel money from investors through member-brokers, to a small group of 24-odd NSEL members-borrowers. For this “assured return” scheme, the brokers were collecting a juicy 5%-6% as brokerage, fees and commission. Neither the brokers, nor the investors, had done enough of due diligence and therefore, to their misfortune, found themselves to be lenders without any security, instead of investors in an assured return scheme that their brokers aggressively sold them.
Apart from channelling money from “investors” these member-brokers had also put in some of their own money into the scheme. The borrowers now owe as much as Rs5,380.53 crores in unsettled dues. But which member-brokers were on the other side of the racket, that is, which of the brokers were most aggressive in channelling the money? The biggest was Indian Bullion Markets Association Ltd (IBMA), a group company of Financial Technologies (India) Ltd, the promoter and 99.5% shareholder of NSEL. It is not yet clear, who the “clients” of IBMA were. Who were the other brokers?
They are some of the most prominent names of Indians stockbroking such as Anand Rathi Commodities, India Infoline Commodities and Geojit Comtrade. These people were being actively wooed by FT-MCX group in creating volumes in its various exchanges. While the names of members-borrowers who have defaulted are known, the list of member-brokers who funnelled the money for the borrowing-lending racket at 16%-18% fixed return has not been published so far. Here is the list of top 25. The complete list of those who owed money as well as those who were owed money from the NSEL system in early August, can be accessed at the end of this piece.
|Top 25 Members-brokers Owed To||Amount owed (Rs Cr)||Paid so far (Rs Cr)||Still owed (Rs Cr)|
|Indian Bullion Markets Association||1159.55||24.94||1134.61|
|Anand Rathi Commodities||629.21||13.46||615.75|
|India Infoline Commodities||326.23||6.98||319.25|
|Motilal Oswal Commodities||262.88||5.62||257.26|
|Purvag Commodities & Derivatives||132.58||2.83||129.75|
|JM Financial Commtrade||83.62||1.78||81.84|
|Arihant Futures and Commodities||55.88||1.19||54.69|
|RR Commodity Brokers||49.02||1.04||47.98|
|Nirmal Bang Commodities||46.64||0.99||45.65|
|India Nivesh Commodities||37.92||0.81||37.11|
|Suresh Rathi Commodities||37.7||0.80||36.9|
|Chimanlal Popatlal Commodities Broker||37||0.79||36.21|
|Rainbow Commodity and Derivatives||35.91||0.76||35.15|
|Ludhiana Commodities Trading Services||34.64||0.74||33.9|
Interestingly, among the names are two public sector companies Projects and Equipment Corporation and Metals and Minerals Trading Corporation. What business did these people have to invest in NSEL? Are their boards and respective ministries asking them any questions?
As of now there is a very slim chance of the member-brokers and their clients getting back much money.
On 14 August, NSEL had posted a detailed schedule of pay-in and pay-out from and to its members-borrowers in which it owed Rs5,380.53 to its member-brokers (top 25 disclosed above) while it had to retrieve Rs5,574.35 from other members. Moneylife analysed the payout numbers released by NSEL and compared it with the total amount that NSEL had to settle. We found out that only a total of Rs119 crore, or just 2% of the total dues have been paid out to members, in three pay-out instalments so far. In the three settlements, NSEL has paid just Rs92.12 crore, RsRs12.60 crore and Rs15.36 crore to members from the pay-in proceeds, on 20 August, 27 August and 3 September respectively. But as per the settlement schedule, by now it should have received Rs524.16 crore from those who owe NSEL and paid the same amount to members.
“Investors” who were lured into investing in NSEL’s racket by Anand Rathi, India Infoline and others, have every reason to be worried about not getting back their money in full. While NSEL expects to settle its entire dues by 11 March 2014, this seems unlikely. Are the brokers liable to pay their investors? Given how these brokers operate, they will neither own moral or actual responsibility to pay back their investors. It was just another product they had sold for fat commission.
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