Case Study in 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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Excerpts Contd...

Pruning The Plantations

According to estimates, more than 4500 plantation companies had raised over Rs 25,000 crore from the public during the 1990s. The laxity 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 vis-a-vis the other non-banking financial companies (NBFCs).

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...

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

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.

An investor commented, "Why do people invest in these kinds of firms? Because people want to make more money, fast. What do we get from the nationalized banks as interest? A mere 5-7%! Whereas Anubhav was paying 21-24% interest. Why can't the government pay better interest?"

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...

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Exhibits

Exhibit I: A SEBI Press Release on Collective Investment Schemes
Exhibit II: Anubhav - Key Financials


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