Delhi-based Jindal Poly Films is under SEBI’s scanner for alleged windfall gains made by its promoters during the acquisition of ExxonMobil’s films business, as per hindubusinessline.com. SEBI is examining whether Jindal Poly gained at the cost of small shareholders by entering into a maze of overseas transactions evidently to avoid tax.
According to a complaint filed by investors, in 2013, Jindal Poly acquired ExxonMobil’s films business, which had net assets of €242 million, for a bargain price of €126 million. The benefits of around €113 million (after accounting for acquisition cost) were recorded as gains in the income statement of the acquiring company, providing an immediate boost to the buyer’s equity.
The acquiring company was JPF Netherlands BV, in which Jindal Poly held 51 per cent stake; the balance 49 per cent was given away to promoter group entity Anchor Image & Films Singapore virtually free. JPF Netherlands was set up with an equity base of only €84,000, of which contribution from the promoter-held entity, Anchor Singapore, was merely €41,000. Subsequently, JPF Netherlands was independelty valued at Rs. 8,248 crore.
It has been alleged that the Jindal Poly promoters made windfall gains by acquiring a stake worth around Rs. 4,000 crore (49 per cent of Rs. 8,248 crore) for barely Rs. 30 lakh (that is, €41,000 at the then-prevailing conversion rate of Rs. 70).
The acquisition of ExxonMobil’s films business for €242 million was funded and guaranteed by the listed entity Jindal Poly, which had arranged loans from SBI, Exim Bank and Societe Generale. Significantly, while Anchor Singapore was given 49 per cent stake, neither it nor its promoters made any financial contribution towards the loans.
The Singapore entity is a 100% subsidiary of Anchor India Image & Films, held by Soyuz Trading and Rishi Trading, which are 100% beneficially owned and controlled by Shyam Jindal and his family. Effectively, the allegation is that Shyam Jindal and his family were indirectly holding 49% in Jindal Poly’s Netherlands subsidiary through multiple layers of shell companies. No approval from shareholders was taken before ‘gifting’ the 49% in the Netherlands entity to the promoters.