Syndicate Bank fraud: Another shadow on Prakash Industries

Was already the subject of CBI attention and negative publicity in coal scam case, though it had been saying it was doing well operationally

The article has been modified at 12:30 pm on August 5, 2014

When S K Jain, chairman of Syndicate Bank, was held in a bribery case over the weekend, it was not the first time the CBI took the name of Prakash Industries in a scandal. The company came under investigation in the coal block allotment scam less than a year before.

CBI, late on Saturday evening, arrested Ved Prakash Agarwal, chairman and managing director of Prakash Industries, and Vipul Agarwal, a director, on the charge of offering bribes to get a credit facility from the public sector bank. CBI had on March 27, 2014, registered a First Information Report against his company for alleged irregularities in allocation of coal blocks between 2006-09.

Established in 1980, Prakash Industries runs an integrated steel plant at Champa in Chhattisgarh. It was allotted three coal blocks in the state, at Chotia, Madanpur & Fatehpur. The Chotia mines are already operational. Besides, it owns iron ore mines in Chhattisgarh and Odisha, and a 100-Mw captive power generation plant.

CBI alleged Prakash Industries had misrepresented facts about the net worth of the firm while applying for coal blocks. Agarwal is alleged to have used his political connections here. When his name appeared in the scam, his brother, Jaiprakash Agarwal, chairman and managing director of Surya Roshni, issued a statement disassociating himself from his brother. “We both brothers do separate businesses… I just came to know that the coal mines were allotted... based upon merit..” Incidentally, Jaiprakash Agarwal’s Surya Foundation is considered close to the Bharatiya Janata Party.

Despite facing tough times for a while now, a May 2014 press release of Prakash Industries said it had added capacities in its steel melting and ferro alloys divisions, “resulting in achieving record production levels in these” during 2013-14. In the finished steel segment, the company achieved “optimum level of production and capacity utilisation”. In fact, it reported net income from operations of Rs 2,597 crore for 2013-14 and 15 per cent improvement in operating earnings to Rs 379 crore. The profit after tax also increased to Rs 173 crore, against Rs 165 crore in FY13.

The company is currently setting up an additional sponge iron kiln, expected to be commissioned in March 2015. With fullstream operations of the steel and ferro alloy capacities, set up last year, along with fresh capacities coming up in the current year, the company said it expected significant growth in its production, sales volumes and operating earnings margins in FY15.

On the captive iron ore mines allotted in Chhattisgarh and Odisha, it said it was making all efforts to open these at the earliest, subsequent to which the company would not only become completely self-reliant but also get insulated against “any vagaries of the market”.

And, now, the Syndicate Bank bribery case has come as a new and severe blow to it.

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The article has been modified to correct the year when the CBI had filed an FIR against Prakash Industries.