Heritage Foods in eye of political storm

Special Correspondent

Transfer of land and sale of stake by Heritage on same lines as that of Satyam: Vundavalli

Congress MP seeks comprehensive probe into the whole affair

Heritage Foods president Sambasiva Rao says charges ‘politically motivated’

HYDERABAD: A political controversy has broken out over the Congress’ allegation of transfer of prime land of Heritage Foods, promoted by Telugu Desam president N. Chandrababu Naidu’s family members, to its subsidiary Heritage Infra.

By transferring the land at Kondapur near Hyderabad at a ‘nominal price, much below the market price’, it is alleged that Heritage Foods has deprived its shareholders of legitimate value. Another allegation is that the transfer of land and subsequent sale of Heritage Foods’ stake of 51 per cent in Heritage Infra to a ‘little known’ Sri Chakra Merchandising Pvt Ltd, helped in the former (Heritage Foods) showing profits when actually it was incurring losses.

Quoting a report published by Telugu daily Sakshi owned by Chief Minister Y. S. Rajasekhara Reddy’s son, Y. S. Jaganmohan Reddy, the Congress MP, V. Arun Kumar, likened the transfer of land and the sale of stake to what Satyam had done. In a letter to the Union Minister of Company Affairs, Premchand Gupta, he demanded a combined investigation by the Directorate of Revenue Intelligence, CBI, RBI and Serious Fraud Investigation Office against Sujana group alleging it of owning Sri Chakra.

On the other hand, Heritage Foods president M. Sambasiva Rao described the charges and the report as “politically motivated” and “baseless”. He clarified that the company presented its financial statements accurately to its shareholders indicating not only profits earned in the dairy division but also the losses incurred in retail operations wing, as also income received from disinvestment of its shares in Heritage Infra Developers Limited. The land in question, 3.42 acres in Kondapur and Kothaguda in Ranga Reddy, was acquired in 1995 (3.23 acres) and 2000 (0.19 acres) at Rs. 19.65 lakh, he said. The value of land as per Government Registration and Stamps Department was Rs. 30 lakh per acre in March 2006 when it was sold to Heritage Infra at Rs. 80 lakh per acre or for Rs. 2.74 crore for 3.42 acres.

As Heritage Foods required funds for loss funding its retail business and expansion of dairy and agriculture infrastructure, it preferred disinvestment of its total shares (20.40 lakhs) in March 2008 in Heritage Infra in favour of Sri Chakra Merchandising at the rate of Rs. 174.99 per share. An amount of Rs.35.69 crore was received. This transaction fuelled business growth and benefited its shareholders substantially.

All procedural requirements for conducting this transaction were followed and reported to the stock exchange on March 28, 2008 and notified in two dailies the next day. It was also posted on the company website and explained to shareholders in the 16th Annual General Meeting held on September 26, 2008. “The reasons for creating suspicion and confusion in the minds of the public by printing such baseless news are obvious,” he added.

No moral right

Meanwhile, the CLP said that Mr. Naidu had no moral right to talk about corruption Heritage Foods was caught in a scandal of diverting funds.

Government Chief Whip N. Kiran Kumar Reddy, Government Whips S.Udayabhanu, D.Sridhar Babu and Mallu Ravi in a statement issued here on Wednesday wanted the Left parties to explain their stand on the issue.

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