From top Indian jeweller to liquidation, how Gitanjali Gems lost its sheen

Once a stock market darling, the jewellery chain heads for liquidation

How quickly the mighty can fall — in six years, Gitanjali Gems has gone from being one of the best known jewellers to facing liquidation. Having defaulted on payments of dues to the tune of Rs 12,550 crore to 31 creditors, the company is headed for liquidation while its chairman Mehul Choksi remains a fugitive.  

According to a notice filed on the BSE’s website, the company’s committee of creditors failed to approve extensions for a corporate insolvency resolution process, making liquidation the logical denouement.  

Senior bankers said there was no resolution in sight.  “Resources (money) are precious to us and no one would like to throw good money after bad.  There is no point in keeping a resolution professional and other infrastructure in place for a case like this,” said one senior banker with a large public sector bank.

He added that some lenders have already filed claims in various forums against Gitanjali's promoters for recoveries. “That legal battle will continue in India and abroad," he said. 

Choksi is in Antigua and facing extradition over the Rs 14,000 crore Punjab National Bank fraud along with his nephew Nirav Modi. 

Founded by his father Chinubhai Choksi in 1966, the company had become one of Mumbai's most high profile jewellers. The company’s stock traded at a steady Rs 600 on the BSE and it had a market capitalisation of  Rs 6,000 crore. Choksi used to have top Bollywood’s stars, including Bipasha Basu, Aishwarya Rai and Kareena Kapoor, marketing his labels and attending his events. 

Despite Choksi’s wealth (over Rs 3,300 crore when the stock peaked), he was frugal to a fault. On visits to Europe when he and his staff stayed at hotels for trade shows, he tried to get his managers to bring his dirty laundry back to India rather than pay the hotel’s laundry charges, according to a former employee.

But within a year that all went upside down. From being the poster boy of the diamond fraternity, the Gitanjali stock crashed by 90 per cent, evaporating close to Rs 5,000 crore of market capitalisation. 

How did it unravel?

Choksi got drawn into a securities scam that was being investigated by the Enforcement Directorate and the Securities and Exchange Board of India (Sebi).The issue revolved around his alleged involvement in rigging his shares in collusion with a Mumbai brokerage, Prime Securities, and two dozen entities that traded in Gitanjali shares. 

The market watched as foreign investors like Goldman Sachs and Macquarie unwound their positions. On July 18, in 2012, the NSE banned Prime Securities and Choksi from trading. There were also allegations that he ran dozens of shell companies that siphoned money out of the company and engaged in circular trading, a modus operandi similar to that favoured by Nirav Modi. 

Atul Merchant, a former consultant at Gitanjali who worked across multiple roles that included polished diamonds and outsourcing jewellery, said that Choksi's undoing was his never-ending investment in brands.

"If you research back to the start of the firm in the 1960s, Gitanjali's forte was diamond trading, not manufacturing and that’s the area that has gotten Choksi into trouble because he just didn't have the mindset for it," said Merchant. 

Choksi apparently liked to blame his company's woes on regulations or increasing gold duties but it was really his business plan that was faulty. As someone who liked to emulate Louis Vuitton and wanted to create scores of luxury  brands, he went overboard, launching as many as 30 different brands at one stage that included Gili, Maya, Asmi, Nakshatra, and Gitanjali. Most shut down after 2013. Those who know him say that in recent conversations (he makes calls using disposable SIM cards), he has indicated that what he misses most about leaving India is running his company and the attention from his employees that he once enjoyed. That’s something that will now be lost forever.