Mumbai Capital

Restrain FTIL from funding startups: petition

The Rs. 5,600-crore settlement scam at the National Spot Exchange Ltd (NSEL), which forced Financial Technologies India Ltd (FTIL) to sell its stake in its equity, commodity and power exchanges, now threatens to affect its recently-unveiled business of investing in startups.

A petition has been filed in the Bombay High Court to restrain the listed entity from using its funds for venture funding or angel investment in startups.

The company is already barred by way of a court order from using its funds for any purposes other than managing its day-to-day operations.

The petition, filed by LJ Tanna Shares and Securities, states that FTIL plans to invest $500 million in this venture under the brand ‘63 Moons’ even as the court has barred the company from venturing into any new business.

In September 2014, the HC passed a detailed order, which included a joint undertaking by FTIL and its founder Jignesh Shah that said they would seek prior permission of the court before using funds realised from sale of assets for purposes other than the ‘ordinary course of business’.

In August 2015, FTIL proposed to change its name to 63 Moons to venture into the area of incubating startups and creating patents in the technology sphere. The Registrar of Companies has, however, rejected FTIL’s proposal regarding a name change. The petition claims that investments in startups is a “high risk business model” and that the company may incur substantial losses, which will affect its capacity to repay NSEL investors in the event of the courts approving the merger of NSEL with FTIL.

In February, the government ordered the merger of NSEL with FTIL, which meant that all the liabilities of NSEL would shift to FTIL books of accounts. FTIL, which owns 99.99 per cent stake in NSEL, has challenged the merger order in the high court.

Ever since the NSEL scam came to light in July 2013, the impact on FTIL has been clearly visible. In July 2013, the market capitalisation of FTIL was around Rs. 2,500 crore, which has since fallen to Rs. 394 crore. In late 2012, FTIL commanded a market capitalisation of more than Rs. 5,500 crore.

In response to an email sent by The Hindu , FTIL said the matter was sub-judice, with the hearing scheduled in a few days’ time. “Our response to the matter has been filed with the High Court,” it said.

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Printable version | Jan 21, 2022 5:47:06 AM |

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