Over 1,000 crore rupees at risk at Anugrah Stockbrokers and Associates?
Even though the regulator has tightened the rules to prevent the misuse of investor funds and stocks, another brokerage firm, Anugrah Stock & Broking Pvt Ltd, appears to be on the brink, despite a reprieve from the Securities Appellate Tribunal ( SAT) on August 17 against the action of the National Stock Exchange (NSE).
The action by NSE and SAT has panicked clients of Anugrah and his associates who claim to “handle” well over Rs 1,000 crore. Clients failed to reach associates who channeled their investments. Concerned investors flocked to Anugrah’s Vile Parle (Mumbai) office and sent emails and letters demanding responses. Almost everyone has hit a wall. It is important to note that, according to reliable sources, “Anugrah’s transactions on the stock market are not that high to justify the type of loss in her official book.” So what’s up?
Until a few days ago, the Securities and Exchange Board of India (SEBI) seemed unaware of what is going on, although simple research shows that Anugrah and one of his associates, Teji Mandi Analytics Pvt Limited, should have been on the regulator’s radar since they were both fined in the past.
NSE began investigating various brokers following the post-COVID market turmoil and especially after the sudden and voluntary shutdown of India Nivesh.
The Exchange discovered that Anugrah had been running an unauthorized Derivatives Advisory Service (DAS) through an associated company called Om Shri Sai Investments (OSSI) since 2017. The service was closed in 2019. It had collected 165.10 crore rupees from investors. NSE posted a show cause notice on July 17 and asked Anugrah to respond by July 27. One day before the end of the deadline, the firm asked for more time. NSE therefore closed Anugrah’s trading rights on all derivatives segments (futures, options, commodities and currencies) as of August 3.
The brokerage company rushed to SAT and got some sort of reprieve. The SAT decided, in its wisdom, that there was no rush for the NSE ex-parte action after giving only 10 days. Thus, he ordered the immediate restoration of the marketing rights. NSE had to line up and relaunch Anugrah’s listing on August 17.
But the Tribunal also imposed two conditions on Anugrah. He asked the company to file Rs165 crore with the NSE within two weeks, while allowing three weeks to file a response. The next hearing has been released for October 14, and Anugrah cannot enroll new clients in the derivatives segment by then or continue DAS through OSSI. (Misc. Appln No244 of 2020 – Urgent request, Anugrah Stock & Broking Ltd vs NSE)
A Google search, however, reveals that Anugrah had been fine Rs5 lakh on March 20, 2019, for non-settlement of customer accounts, in particular those of inactive customers. This concerned an inspection in April 2017. This is exactly the problem which is solved from September by the new SEBI rules. Did SEBI not find any links to advice on unauthorized derivatives led by associates such as Teji Mandi and Om Shri Sai at the time?
It is important to note that there were no complaints from investors at this time. This shows that when things are going well, investors are happy to provide a General Power of Attorney (POA) to brokers and their associates without much verification.
Teji Mandi Analytics and the Rs1,000 Crore question
In response to one of my tweets on this issue, several investors sent me documents, POAs, presentations and contracts that reveal that Anugrah’s biggest partner was Teji Mandi Analytics Pvt Ltd. Most of the consulting accounts were opened by Teji Mandi, whose link to Anugrah appears in a simple Google search. Worryingly, this company has also been kept under wraps and investors trying to verify their funds have received no response.
Teji Mandi’s latest marketing presentation to investors claims to have Rs800 crore under the service. Here are screenshots that show he has achieved annualized returns of over 19%. Is it any wonder that investors aren’t complaining? The last balance sheet and audit report as of March 31, 2020, shared by an investor, do not give rise to any concerns either.
Between Teji Mandi and Om Shri Sai Investments as well as Anugrah’s direct clients and fundraising, the company clearly had transactions of over Rs 1,000 crore.
While SEBI claims to have very sophisticated software that offers real-time tracking, much of what I discovered about Anugrah was through a most basic Google search and a question asked on Twitter. On May 25, 2009, SEBI prohibited Anugrah from buying and selling securities.
While these fines are nothing more than a slap in the face, SEBI apparently does not bother to report these entities or monitor their activities and compliance, despite spending on highly sophisticated systems that allegedly provide business intelligence in real time. Surely a powerful and well-funded regulator should be able to do much more than what an open Google search offers?
Anugrah has taken out short-term loans for its operation as well as bank guarantees and an overdraft. Here too, its record is uneven. In December 2017, CRISIL reported that the issuer was “not cooperating” with the rating agency, despite constant monitoring and had, therefore, “migrated” the rating. The agency warned investors, lenders and everyone else, which included a Rs14 crore bank guarantee and a Rs11 crore overdraft facility.
Anugrah had obtained a rating from ICRA to increase Rs13 crore in short-term fund-based banking lines. This is all relevant in the context of the lawsuit / arbitration involving the “funded” fixed deposit of India Nivesh Rs100 crore. Is this another case of fundraising by pledging a loan as a margin / bank guarantee? I have emailed Anugrah as well as Teji Mandi for responses and will post their response, if any, when I receive them.
Here are some returns from investors, whose names have been changed. Arvind Sinha believes Teji Mandi is a sub-broker of Anugrah and “executes algorithm-based trades in the F&O segment (only Nifty and Bank Nifty options) for all clients”. He said, “We are not asking for reimbursement for losses, but what about the balance that goes to the company? It appears that the broker has become insolvent ”, as his numerous emails and calls did not elicit any response.
This investor had demanded the closure of his trading account and alleges that he “identified false contract notes which raise concerns about fraud, misrepresentation and unauthorized transactions” by Teji Mandi and / or Anugrah. This investor says that even after NSE restored the trade, he was not allowed to trade even in the cash segment by Anugrah and Teji Mandi. He alleges that the shares were not transferred back from the pool account in violation of the SEBI rules (SEBI / HO / MIRSD / DOP / CIR / P / 2020/28 of February 25, 2020) and a request to disengage the shares and their return to his deposit account was ignored.
Another investor, using a pseudonym, says that a group of investors have collectively invested over 19 million rupees through Anugrah’s partner (whom he does not name, but it is probably by Teji Mandi Analytics). Some of them found missing inventory on their demat accounts, which was most likely used for margin payments and not credited. Their follow-up to close their accounts and transfer funds / shares also went blank. This group included an investor who had invested Rs 1.55 crore with his wife no later than March 2020 via Teji Mandi Analytics.
The big question now is whether Anugrah is able to spit out Rs165 crore in the next five days, as ordered by the SAT. But investors are panicking; NSE is closely monitoring the development of the situation and the regulator remains silent.
(Updated and corrected August 28, 2020.)