THE story is all too familiar for Bihar. Siphoning off of funds, unaccountability, flouting of norms. But only that this time, it's not the much-maligned state government official. The new hateword in the state is JVG Group, after its companies have been closing down offices faster than it could manage to open them. The missionary zeal that its agents had shown while collecting crores of rupees of deposits from the state is now missing when it is time to pay back. All this at a time when the ghost of the CRB scam has not yet faded away.
The state is the worst hit simply because the JVG Group had spread its wings the widest here. Names of thousands of depositors, who are not sure when and whether they will get back their principal amount, forget the interest, may just end up as another piece of statistic for the company. And when you look closely, you fear that someone has played foul. And made money at the expense of the small, gullible investor. Pick up any town or city from India's second most populous state, well almost any name, and JVG had opened a branch there during the last three years to rake in deposits. So busy is JVG Group chairman V.K. Sharma troubleshooting that, despite several requests by Outlook for an interview, he could not spare time to answer the charges of irregularities on the part of his officials or companies.
Says Sushil Modi, leader of the Opposition in the state assembly: "The people of the state have lost over Rs 10,000 crore to non-banking finance companies (NBFCs) over the last five years." He dismisses the commission of inquiry, headed by sitting Patna High Court judge Justice Nagendra Rai, set up by the state government to look into the mushrooming of NBFCs in the state, as "a farce and an eyewash". He says that JVG had promised an investment of Rs 800 crore in the state over three years. Not a paisa of this has materialised.
Complaints by depositors, fresh from the horror stories they had read following the CRB scam, of money not being repaid by JVG is being met with advertisements in the local papers, claiming that payments have been postponed till December 31 this year.
The vocal chords of the animal husbandry mafia of Bihar, which had invested huge sums in the company, are however muted since the source of their money could be put to scrutiny. However, there are no answers forthcoming to specific charges of bungling by employees and agents of the group. The only silver lining for JVG investors: their fate is better than those who invested in fly-by-night companies which disappeared after collecting deposits from the unsuspecting public.
Possibly, the story of no depositor can be more moving than Haria Munda's, a rickshaw puller in Ranchi, who was coaxed by a JVG agent to invest Rs 51,000 that he received from the sale of his ancestral land into one of the deposit schemes. Five months after he deposited the money, the illiterate Munda, who was promised 18 per cent per annum interest, has now found that the receipt he was given by the agent does not mention the agent's code, the account number nor the name of the scheme. The receipt now is just worth the piece of paper that it is.
WHILE rumour mills are working overtime, the income tax department has initiated moves to carry out a thorough investigation of the group. The department has also found grave irregularities in the returns filed by the companies as well as Sharma's family members.
At Ranchi, JVG employees have not been attending work for over a month now, after deposit mobilisation activities came to a grinding halt in August. Monthly deposits collected here were in the region of Rs 99 lakh till the end of the last financial year. At Jamshedpur, all the offices have closed down. Daily wage earners, who used to gather outside the offices hoping to get back their deposits, have now given up, perhaps thinking that it was futile to give up another day's work for something that may never come back to them.
Similar is the story in the north Bihar towns of Arrah and Begusarai. Arrah, where 15 branches were operating at one time, has only one left now. In some towns, angry investors have manhandled JVG staff and ransacked the offices. Says Malti, a mother of two, who has just found a job as a domestic help in Patna: "I have forgotten the interest I was to get on Rs 5,000 that I had deposited with them. I am praying that I get only the mooldhan (principal)."
The ire of the employees, most of whom have not been paid for months now, is directed towards their seniors, who are just not traceable. Strangely, many of the staff are not sure when they would be working for which of the group companies—JVG Finance, JVG Leasing or JVG Securities. "Who knows which company we will be working for in the next year," says an employee in the Ranchi regional office. He has not been going to office as he may have to face the wrath of investors, with senior officials having decided to go on long leave. The official word is that all of them have gone to the head office to sort out matters. If that does not satisfy inquisitive depositors, the senior officials are on leave for the last two months. Similarly playing hide and seek are the ubiquitous agents of the company.
Some of the more resourceful of the employees and agents, though, are already appearing in new avatars. No prizes for guessing what they're doing. Starting other NBFCs, of course. And the latest company to enter the market in a big way is the Badrika Group of Companies. Already, Badrika washing powder has appeared in shops and Badrika Plantations is catching the fancy of investors. The company boasts of former JVG regional manager Rajesh Gupta as its assistant zonal manager, apart from several other officials.
BUT why are deposit companies mobilising in Bihar, apart from neighbouring West Bengal and Uttar Pradesh? "There is enough idle money because of the high density of population," according to Sahara Group chairman and managing worker Subrata Roy. Moreover, the region is not exactly known for the enterpreneurial acumen of its people.
It is, therefore, not surprising that the JVG Group managed to win the confidence of the small investor here. The story, however, could possibly put a Bollywood scriptwriter out of job. In Ranchi, the company reportedly spent Rs 1.25 crore to stage a Mamta Kulkarni Nite when it was time to introduce its operations and schemes in this industrial township. More than 2,000 people were invited to a dinner hosted by JVG chairman Sharma, who was present in person to explain to prospective investors the benefits of investing in his company.
The list of invitees was very carefully drawn up. Among those who joined in were a large number of engineers and administrative staff at the public sector Heavy Engineering Corporation who had opted for the voluntary retirement scheme; the animal husbandry mafia, which was going great guns—there were no CBI or income tax officials then to ask uncomfortable questions about the source of money; and a number of doctors who had enough money to put into these schemes.
At Jamshedpur, contractors and businessmen were targeted. And in smaller towns, daily workers were coaxed into depositing a minimum of Rs 5 to have an account. It was his grand showmanship, along with promises that the money would be invested back in the state, that helped Sharma win the confidence of investors. Nearly the entire town of Arrah was invited for lunch when the company was to commence operations. Those who thought that "a company which can feed almost the whole town has to be good", are now cursing themselves. And similar efforts were made in dozens of smaller towns. Sadly, the festivity is missing when it is time to pay up.
As part of its plans, JVG purchased land on the outskirts of Patna and immediately announced the grandiose Loknayak Jaya-prakash Narayan Aawas Yojana. Three years later and after the foundation stone was laid by Union minister Ram Vilas Paswan, no construction has taken place except the boundary wall and a water tank. And compared to the fancy farmhouse that Sharma has in Mehrauli in south Delhi, this plot of land looks like a stone age relic. JVG's chain of department stores, Apna Bazaar, has failed to take off and is on the verge of closure with huge payments to creditors outstanding. The deposit schemes which were garnering nearly Rs 30 crore from Bihar monthly have now come down to a trickle.
So, where has the money gone? That is what the depositors are now asking. And getting no replies from a company which has collected over Rs 800 crore in five years. The last few months have been very bad for the company. And, indications are, the next few will be worse, if payments are not made to the depositors and IT sleuths, SEBI and RBI turn on the heat. The air is thick with rumours in the absence of any authentic information, creating a flutter each time there is talk of the company closing shop.
The company bought the Mumbai-based Orkay Mills for over Rs 200 crore but no productive use has been made of that purchase. With investors' money locked up in such projects, there is little hope of better times till the company puts its house in order. For that CMD Sharma would have to take action, not just make announcements.
