Finance Case Study - The Anubhav Plantations Scam|Finance|Case Study|Case Studies

The Anubhav Plantations Scam

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Case Details:

Case Code : FINC009
Case Length : 11 Pages
Period : 1992 - 1998
Pub. Date : 2002
Teaching Note : Available
Organization : Anubhav Group, Anubhav Plantations
Industry : Agriculture, Farming & Fishing, Financial Services
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Plantations 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 Anubhav Foundations, Anubhav Green Farms & Resorts, Anubhav Resorts and Anubhav Communications. In the schedule explaining the loan provisions, it was mentioned that the funds had been used for the purchase of residential apartments (Anubhav Foundations) and farmland (Anubhav Green Farms), and to meet the expenses incurred on advertising and marketing (Anubhav Communications)...

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How the Schemes Worked

Most of the plantation firms had a skewed capital structure. According to CRISIL's findings, on an average, while 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. Most of these companies were reluctant to provide information about themselves. During investigations conducted by Business India, officials at Parasrampuria Plantations refused to even talk to the magazine. However, when the magazine sent people posing as investors, the response was extremely enthusiastic. Investigations regarding the schemes being offered by various companies across the country indicated that things were definitely out of joint...

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