PLANTING A DREAM: ANUBHAV PLANTATION SCHEME

"You are giving deposits because you trust me. Leave it at that."

- C. Natesan, Chairman, Anubhav Group, in 1998

Presented by:-Ashish barapatre (13034)Aditya kapoor(13031)Bhavik kothari(13035)Ankur gupta (13032)

ABOUT C.NATESAN• C.NATESON was a commerce graduate from Chennai's

Vivekananda College and a chartered accountancy course dropout.

• Natesan started his career in 1983 by launching a consultancy firm, 'Yours Faithfully Consultancy.‘

• In 1992, he started Anubhav Plantations Ltd. (Anubhav) was floated as a public limited company.

• Over the years, the Anubhav umbrella expanded to include various other companies.

• In 1998, Anubhav had become a Rs 250 crore group. These companies were backed by a nationwide infrastructure of 91 offices and over 1,800 employees.

ABOUT THE CASEDOOMED DEPOSITORS• On 2nd December 1998, thousands of people at

the New Woodlands Hotel in Chennai.• All of them were investors in the collapsed

Anubhav group's teak plantation schemes, and a majority of them were on the verge of bankruptcy.

• The investors had sensed wrong doings at Anubhav when the cheques issued to some of them bounced in mid-1998.

SCHEME 1

OPTION A:-• A 20 year scheme, it offered a 77 times return on a minimum

deposit of Rs 6000 (maximum Rs 60,000). One Rs 6000 unit fetched the investor 300 square feet of land with three teak saplings.

• The investor was promised Rs 1,000 every year for the first 6 years; an additional Rs 6,000 at the end of the 6th year; and another Rs 12,000 after the 12th year.

• Finally, at the end of the 20th year, the investor was to receive Rs 3 lakh or 40 cubic feet of teak, whichever he preferred.

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SCHEME 2:-• Same as Option A, except that the annual

returns in the first 6 years were replaced by a payback of Rs 15,000 at the end of the 6th year.

SCHEME 3

• For an investment of Rs 6,000, the investor got outright ownership of the land, as well as a 5-year lease of 100 sft. He, in turn, sublet the land to Anubhav, with the returns amounting to bi-annual payments of Rs 500, and Rs 5,000 at the end of the 5th year, and a bonus 1.13 cubic meters of teak - valued at Rs1 lakh - at the end of the 20th year.

WHAT MADE PEOPLE TO INVEST

• Natesan had associated Anubhav with the World Wide Fund For Nature (WWF) and thus conveyed a positive image of his company to the media and the investors.

• The interest earned on plantation schemes was treated as agricultural income, it was exempt from tax.

• As a result, Anubhav's schemes became very popular and attracted thousands of investors.

• Moreover, since the unit value of the teak schemes was very small, investors could easily afford them.

THE PLANTATION WITHER• Anubhav's shaky financial condition could easily be seen

in its books. In 1996-97, plantation income amounted to Rs 35.32 crore and net profit was Rs 38.69 lakh.

• The low profitability was attributed to the group's high, non-productive, expenses. In March 1997, Anubhav's current liabilities exceeded its current assets by Rs 6.40 crore.

• The company's paid-up equity capital was just Rs 36 lakh while its borrowings, both secured and unsecured, amounted to Rs 2.64 crore. Loans and advances amounted to Rs 25.95 crore, of which Rs 10.75 crore had been lent to other companies of anubhav group.

HOW THE SCHEMES WORKED• Rs 35 lakh was contributed from the promoter's

side, the public funds raised were usually above Rs 300 crore.

• Most of these companies did not even have sufficient crop insurance. Also, the offer documents of these companies did not highlight the risks involved.

• The lack of industry regulation made it virtually impossible for the average investor to distinguish between a fly-by-night operator and a genuine player.

PRUNING THE PLANTATION• More than 4500 plantation companies had raised over Rs 25,000

crore from the public during the 1990s. The relaxity of the concerned regulatory authorities was a major factor behind these scams.

• In the early 1990s, setting up a finance company was very simple as there was no supervisory authority for sole trading or partnership firms, nor did they fall under any regulatory framework.

• This gave them a competitive advantage.• Though there was a limit on the number of depositors these sole

trading or partnership companies were allowed to have, there was no ceiling on the amount of deposits they could collect.

• As per the Partnership Act, a partner in one company could be a partner in numerous other partnership firms...

REAPING THE FRUITS OF GREED• With the stock markets performing badly and banks

cutting back on interest on deposits, plantation schemes appeared very attractive for investors impatient for returns and willing to take risks.

• As nationalize banks pay interest upto 5-7 % anubhav plantation scheme was giving 21-24%

• Explaining why these schemes were so attractive to the public as well as the finance companies, Natesan commented, "We offer 24% for all deposits of three years and above. This is not high when compared to the interest charged on loans by banks. I borrow from banks at 18%. When I do that, I have to offer security for a similar amount...

PENALTY PAID

• A Criminal case was registered against the Chairman and Directors of Anubhav Group of companies in Chennai City Police, CCB Cr .No 1431/1998 U/s.120 (b), 409, 420 r/w.34 IPC on 13.10.1998.

• Total amount involved: Rs.107,12,33,696/-• Amount refunded by the company:

Rs.100,44,64,461/-• Total No. of Claims settled -31,431 depositors.• Total No. of depositors: 33,475.• The Chairman of the company C. Natesan was

detained under Judicial custody for the continues period of 8 years. He was released on bail on 22.03.2007.

• As on 30.04.2013, 2044 depositors are pending for settlement. Value of claims to be settled is Rs.6,67,69,235/- (Rupees Six crores sixty seven lakhs sixty nine thousand and two hundred and thirty five only).

THANK YOU