Crb Links Cast Shadow Over Kiev Finance

The collapse of CRB Capital Markets has cast a shadow over another non banking finance company the Calcutta based Kiev Finance which is now facing a run on its deposits.

The root cause of Kiev Finances problems is that CRB reportedly holds a stake of around 40 per cent in the company. Company sources insist that CRBs stake is much less than 40 per cent, but decline to enumerate the precise stakeholding. Kiev Finance has also made major investments in the CRB group.

The company has thus become the second company with a CRB connection to face a run on its deposits, the first being Global Finance Corporation.

 

Credit Analysis & Research Ltd (CARE) has already downgraded the rating of Global Finance Corporations fixed deposits programme to the lowest category, D. This rating indicates that the instrument is either already in default or is likely to be in default soon.

Kiev Finance has made preparations to repay its entire fixed deposit corpus of around Rs 1.25 crore within the next three months. It plans to suspend its deposit mobilisation activities for about two years.

During that period, it will depend largely on income from its leasing activities, its activities as a member of the National Stock Exchange and its activities in the inter-corporate deposit segment.

As per Reserve Bank of India (RBI) norms for premature withdrawal of deposits, the company will pay 14 per cent interest instead of 15 per cent. The brokerage of five to seven per cent will also be discounted.

Kiev Finances net worth (share capital plus reserves and surplus) stood at Rs 24.22 crore as of March 1996, against loan funds of Rs 5.26 crore. According to a Kiev Finance official, the companys total fixed deposit corpus amounts to Rs 1.25 crore. Of this, Rs 45 lakh has already been withdrawn prematurely in the wake of the CRB scandal.

The company is currently processing applications for deposits worth another Rs 30 lakh, which will be repaid over the next few days. The remaining Rs 50 lakh will be repaid within the next three months.

The companys links with the CRB group are indicated in its balance sheet for 1995-96. Kiev Finance holds 70 lakh shares of CRB Capital Markets, valued at Rs 5.82 crore as of March 31, 1996. It also increased its shareholding in Global Finance Corporation to 9.48 lakh shares amounting to Rs 1.31 crore in 1995-96 from a holding of 48,400 shares for Rs 13.2 lakh in 1994-95.

Out of Kiev Finances total investment of Rs 8.27 crore, Rs 7.13 crore has been invested in CRB and Global Finance. Kiev officials admit the company was set up 10 years ago with the help of CRB group chairman CR Bhansali.

The companys balance sheet indicates that Topaz Securities, a 100 per cent subsidiary of Kiev Finance, had investments in several CRB Companies such as TI Pharma Ltd (1.15 lakh shares purchased for Rs 31.2 lakh), CRB Corporation Ltd (2.9 lakh shares for Rs 69.94 lakh), and CRB Capital Markets Ltd (1.18 lakh shares for Rs 38.5 lakh).

Since the company is facing a slowdown in its operations, it sees limited avenues for deployment of resources. The company has not yet announced its results for 1996-1997. However, its net profit in 1995-96 fell to Rs 1.79 crore from Rs 2.95 crore in the previous year, largely due to a huge jump in expenses to Rs 1.49 crore from Rs 23 lakh even as income rose to Rs 5.88 crore from Rs 4.17 crore.