Subhiksha promoter's firm faces payment problem

Tamil Nadu police probing investor complaints against Viswapriya; company says rescheduling payments due to cash flow mismatch

Even as various government agencies are looking into the Rs 5,600-crore payment crisis at the National Spot Exchange, another crisis, involving thousands of investors, is brewing in Tamil Nadu.

The Economic Offences Wing (EOW) of the Tamil Nadu police is investigating complaints against Chennai-based Viswapriya (India) Ltd, a company promoted by R Subramanian, the promoter of retail firm Subhiksha Trading.

Sources familiar with the developments said 4,000-5,000 investors, the majority of them in Chennai and surrounding areas, had been hit by the company's failure to make payments of interest and maturity amounts.

Confirming the investigation, a senior EOW official said Subramanian was produced before the court last month, but the court had ordered his release. A group of 43 investors are said to have complained to EOW.

Some investors said the court seemed to have taken a lenient view because it was being seen as a cash-flow/liquidity issue, which could be resolved in time.

Meanwhile, the company has called a creditors' meeting later this month to negotiate and decide the terms of settlement.

Around July, Subramanian had written to one of the investors, saying, "The issue is one of mismatch in maturities, and not one of NPAs (non-performing assets)." He reassured investors, "The monies are wholly safe, as there are enough and more assets to cover all dues." In this communication, he had asked investors to contact his colleague Rammohan for queries.

Speaking to Business Standard, Rammohan said he handled administration. He directed further queries to Subramanian.

A majority of Viswapriya's investors are senior citizens and elderly widows. "Many investors are Chennai-based senior citizens who had invested their retirement savings to earn extra percentage returns," said R Balakrishnan, a Chennai-based consultant.

The company is said to have received money from people of such a profile from Chennai, Coimbatore and Tiruchi in Tamil Nadu, Bangalore and Mumbai. Some investors have come together under the Viswapriya Investors Welfare Association (VIWA) umbrella. There are about 250 members, and more are joining everyday, say VIWA office bearers. The association is trying to implead itself as a party in the high court proceedings.

A senior citizen based in Chennai's Kasturba Nagar told Business Standard, "My 86-year-old father, a former RBI (Reserve Bank of India) officer, had invested Rs 4.5 lakh in secured debentures offered by the company. My mother is 81. She had debentures worth Rs 4 lakh. They had put money in Viswapriya debentures, as these offered interest rates above bank rates." Another senior citizen awaiting payments said, "The company seems to be facing some cash flow issues. The promoter met the investors last week and assured interest payments by January 2014."

Both the investors sought anonymity. They are confident the company will repay their dues.

The trouble seems to have started in April, when interest payments weren't made on time.

According to the repayment plan submitted by the company and circulated among investors, it would begin interest payments in 2014. The principal amount is proposed to be repaid in three instalments of 20 per cent, 30 per cent and 50 per cent, spread through 33 months.

In the past, RBI and the Securities and Exchange Board of India have taken action against Vishwapriya Financial Services, another group firm. The names of this firm and the promoter figure in watchoutinvestors.com, an investor awareness website.

"Viswapriya (India) Ltd is a two-decade-old company and was the pioneer in introducing asset securitisation and IPO finance in the country in the nineties and has a long track record of innovation. It has been raising monies by secured debenture issuance for nearly 10 years. Any company registered under the Companies Act can issue debentures and accept deposits. As on January 31, 2013, the issuance of debentures was Rs 125 crore. In view of present mismatched cash flows, a rescheduling of the interest and principal payments due on the debentures, without any haircut for investors and with commercial interest for delayed payments as well, has been sought through the high court according to Section 391 of the Companies Act, 1956, and the same is under process presently. The company has receivables both from lending and from participation in property transactions. A small fraction --- less than one per cent of the debenture holders --- had made complaints to the Police (EOW) in respect of delayed payments. When coercive action was sought to be taken by the EOW in violation of the order of the high court, the same was dropped under intervention of the high court. The rescheduling is akin to CDR, or debt-restructuring by banks, and as such is only to overcome the mismatch in cash flows. There is no plan to raise any money except some small infusion of capital, according to the scheme before the court, as the cash flows of the company itself would meet the obligations under the scheme, as the delay is only a timing issue on cash flows.""

R Subramanian
Promoter, Viswapriya (India) Ltd