Ad Here  
February
March
April
May
June
July
 
 
Tax evaders’ get out of Jail-Free Card Reform this licence to…kill Much can be done by us Oh my GOLD Rail-road Rajaraman Two welcome measures from the chief minister... Pool energy prices Outward ho Skewed Economic Zones? They add lustre to Padma Awards Jobs - Lost, Changed or Gained A Fine division of responsibilities Healthy finances of the Chennai Corporation BJP can now hasten its thrust for reforms The Great Fall You too T M Krishna? It’s raining funds for states. Really? Breaking news or breaking credibility? Weaving wealth of western Tamil Nadu Strategic planning the missing link Research for survival... MS Installed CAD and the emergency thereof Kudos to GIM organisers... Focus on agriculture and human resources Chennai Airport-Ready for a rapid take off... Low profile moves Trail-blazing Tamil Nadu When the examiner cheated... Sardar Sarovar – the seventy year itch Need plan over the long term planning After all, customer is the king If not Tamil Nadu, where else? Indian GST – Between extremes… Welcome move to widen the tax net… Land, land everywhere, but... Industry can’t get it from Mars, yet Ganesh’s mantras Welcome rains for damaged roads... CSR, tech revolution and bank crisis A blueprint for the future 1800 parties registered with EC – Less than 60 contest elections Wanted: decentralised financial system Cleansing Indian retail Babes In the wood-RBI North block has little clue to curb inflation Make way for Make in India... Deming awardees galore! An eventful week with VVIPs of Delhi TN - so much to offer... Technology and economic development should be linked Focus on southern TN... An eco-friendly commute in Mysuru What the big B should offer? In the horns of a dilemma Why (not) abolish? Economy through the month INDIA keeps its date with destiny Need for radical RBI reform Well-administered State No groundnuts in groundnut oil! Babes In the wood-RBI North block has little clue to curb inflation A gratifying record Better relations with UK... A dual GST that will protect prosperous states The deluge and the several kindly souls How will it PAN OUT Tryst with GST South India’s 100 most valuable companies Much ado about nothing Sowing seeds of hope Star of the South Truce at Kasturi Buildings Policy Makers Welcome Measures. Work for 10X Change PC please be our Santa Miles to go... Sustainably developing manufacturing sector… A tale of two Bihar babus Public investments and welfare will surge Little surplus after salaries, subsidies and debt servicing A historic indirect tax reform Why throw baby with bath water?
 
Sowing seeds of hope
This page will track the fall from gregarious heights of companies that once ruled Chennai. Lest we forget.

On Wednesday, 2 December 1998, came the news that sent investors into panic. Anubhav Foundations, the much-acclaimed business group, sunk into oblivion and with it took the money of countless investors into the deep sea. What happened and how did they get into such wreckage?  Let’s rewind.

C Natesan, a CA dropout, promoted Anubhav Foundations, a motley group of companies with interests in finance, real estate and timeshare. In 1991, as part of the liberalisation drive, the government opened the agricultural sector to private players. 

Anubhav stepped in by venturing into teak farms. The group expanded operations and set up offices across the country. With 91 offices and approximately 1800  employees, it earned people’s trust. 

 

Teak shriek...

The seeds of the crisis were sown when its teak division formulated several attractive schemes that offered incredible returns. Promising returns of 20 per cent to 30 per cent, the company raised money from a gullible public. By 1998, Anubhav was a Rs. 250 crore entity. 

Look at the sham. The Teak Farm scheme required an investment of Rs. 6000 and gave the investor 300 sq. feet of land plus three teak trees at the end of a rainbow period of 20 years. The returns were both periodic (option A: Rs.1000 annually for 6 years, Rs.6000 after 6 years and Rs.12,000 after 12 years. option B: Rs.15,000 after 6 years) and terminal (Rs.300,000 or about 40 cubic feet of teak). Other schemes such as Good Earth Unit Scheme included ownership of land, as also 100 square ft. of land on lease for 5 years. The investor was required to sublet the land to Anubhav for bi-annual returns of Rs.500 and Rs.5000 after 5 years and 1.13 cubic metre of teak after 20 years. Reads great, isn’t it?

But note that the minimum investment amount was disproportionately higher compared to standard rates. The cost of 300 sq. ft. of an area in the 1990s was merely Rs. 240 and the cost of sapling an estimated Rs. 20. Against that the company was charging Rs. 6000.  It justified the difference as being towards quality soil, fertilizers, maintenance, security, water, etc. Investors bought into the dream. 

Those in the know said that the indicated agriculture yield was too good to be true. There was too much reliance on unexpected events.

Ignored wake up alarms

Several disturbing reports in the company were overlooked. The excessive reliance on borrowed funds (public funds to promoters contribution was in the ratio 1000:1) uncanny cash flows, ostentatious revenue expenditure, asset liability disparity and unreasonable dependence on unexpected events were all red flags. There were several dubious claims made by the company including sale of land over which they did not have any ownership.  In some cases, the documents were photocopies and unstamped. 

Soon reality came home to roost and Anubhav’s cheques started bouncing. Natesan went underground after defrauding investors in a 

Rs 400 crore scam.  The lack of industry regulations, liberalisation in plantation sector (Rs. 25,000 crore was raised by 4500 Plantation companies during the 1990s), sheer greed of the public for higher returns, overlooking negative alarms, all led to the fall. A reckless entrepreneur had smashed the lives of thousands.

Where did all the money go? It was diverted to other companies under the Anubhav group such as Anubhav residential apartments and Anubhav farmlands, in addition to extravagant spending of the founder.

 

Reaping regret today 

An investigating team was appointed and Natesan was held in judicial custody for a continuous duration of 8 years. In 2007, he came out on bail. After the horse had bolted, SEBI appointed a committee to establish detailed regulations to govern the industry. It also appointed a team of CAs to audit the books of the companies.

Out of the 33,761 depositors, the claims of 32,365 were settled. Out of the Rs. 107 crore invested by small investors, approximately Rs. 100 crore has been settled. This scam was yet another example of how a  gullible crowd repeatedly gets overawed by opportunities that are too good to be true. Every ten years or so a Natesan will arrive in this world. 

Author :
Reported On :
Sector :
Shoulder :
RELATED NEWS
ABOUT IE
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
 
PRIVACY POLICY
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
TERMS AND CONDITIONS
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
 
CONTACT US
S-15, Industrial Estate,
Guindy,
Chennai - 600 032.
PHONE: +91 44 22501236
EMAIL: indecom1968@gmail.com