Market watchdog SEBI is probing a bizarre investment scheme wherein hundreds of crores have been raised through public deposits for purchase of cattle with a promise of more than doubling the money through returns linked to ghee produced by them.
As per the latest details accessed by the Securities and Exchange Board of India, the scheme, ‘Cattles & Ghee’, mobilised Rs. 745 crore as on March 31, 2011. Further funds could have been garnered from the depositors since then.
Fearing that a ‘Collective Investment Scheme (CIS)’ is being run without its approval, SEBI began probing the case after receiving investor complaints but its show-cause notices sent to many directors of the company remained undelivered for months.
Last month, SEBI issued summonses, asking the directors of HBN Diaries & Allied Ltd to appear before it on May 29. However, the summonses could not be delivered to at least three of them.
PTI’s emailed queries to the company and phone calls made to the numbers given on its website remained unanswered.
As per its website, the New Delhi-based HBN claims to be in the dairy business since late 1990s with farms at Samalkha (Haryana) and Gannaur, among other places.
However, SEBI, in its notice, said the company was raising money in the name of purchasing cattle with a promise of the depositors’ money getting doubled or even more at the time of maturity.
The company claimed to link the promised maturity amount to the expected price of cattle and ghee and promised to secure the actual investment even if it was withdrawn in a month. The schemes were offered for periods ranging from one month to nine years.
“As per the balance sheet for the year ended March 31, 2011, Rs. 745 crore is being shown under advance from customers. The corresponding figure for the year ended March 31, 2010 was Rs. 529 crore.
“Advances from customers appear to be deposits, thus you mobilised funds to the tune of Rs. 216 crore in 2010-11 and have a total mobilisation of Rs. 745 crore,” SEBI said in its notice. Last year, the watchdog issued notice to another company, Beetal Livestock & Farm (P) Ltd, which was collecting public money in the name of a goat-rearing scheme.
SEBI regulates the CIS, which involves pooling in of money from multiple investors for a specific objective.
HBN Diaries & Allied Ltd and Beetal are not registered as CIS entities with SEBI and, therefore, their investment schemes are in contravention of rules.
The Beetal business model involved paying a few thousands of rupees to become owner of a goat, to be reared by the company, which told the investors that as each animal gave birth to four kids a year, the new goats would be sold to other investors — giving up to a four-fold appreciation in the first year itself.
Sources say such schemes are being run across Delhi, Madhya Pradesh, Haryana and Rajasthan.
After SEBI began probing the HBN case and sought information from it, the company first sought to register itself as a CIS entity with the regulator.
However, when SEBI sought some more details, the company shifted its address and the communication sent to it returned undelivered for some time.
At a later stage, HBN showed its disinclination towards registration as a CIS entity and started seeking more time to reply to SEBI’s notices.
SEBI has found that the company violated various regulations, including those forming part of the SEBI Act and CIS Regulations, for running Collective Investment Schemes without its approval and other offences.
It accordingly issued show-cause notices to the company and its directors, asking why action should not be taken against them.