CBI tries to nail favours-investments link

Hyderabad: The Central Bureau of Investigation appears to be preparing to establish a nexus between the favours doled out by former chief minister YS Rajasekhara Reddy to certain companies and the flow of investments into YS Jagan Mohan Reddy's companies by those companies in a quid pro quo gesture.

The First Information Report filed by the CBI listed 74 such companies and individuals that had routed money into Jagan Mohan Reddy's companies, mainly Jagati Publications, Sandur Power Co Ltd, Carmel Asia Holdings Pvt Ltd and Bharathi Cement Corp Ltd.

The CBI, which based its FIR on the two petitions filed by textiles minister P Shankar Rao and TDP leader K Yerran Naidu and two others, gave a blow-by-blow account of how Jagan Mohan Reddy built his financial empire immediately after his father YS Rajasekhara Reddy became chief minister in 2004.

The FIR said Jagan Mohan Reddy began floating a number of companies since May 2004 (the month and year when Rajasekhara Reddy became chief minister) and those included Sandur Power, Carmel Asia Holdings, Silicon Builders, Jagathi Publications, Indira Television and Raghuram Cements which was renamed as Bahrathi Cements. These companies were floated with the sole aim of laundering the ill-gotten wealth obtained by misusing the office of his father.

For instance, Sandur Power Company, which was taken over by Jagan Mohan Reddy from its promoters in 2001, had been doing its normal business till 2004 but after Rajasekahra Reddy became the chief minister, Jagan Mohan Reddy began pumping his corrupt money into it.

The total worth of the company could not have been more than `150 crore but sold its shares to various companies and persons at huge premium with the objective of receiving bribes and routing the illegal wealth.

As per the FIR, Rs 797 crore was allegedly raised by Jagan in Sandur Power though its net worth was Rs 150 crore. During October-December 2005, the company offered 1,75,49,307 equity shares of `10 to two Mauritius-based companies '2i Capital and Pluri Emerging Company' at a premium of `61 per share.

Through this offer, the company received `124.60 crore from these two foreign companies which were not registered with SEBI as foreign institutional investors (FII). Jagan bought back the shares from the two companies, allegedly at throwaway prices and got the shares transferred in his name. This way the Mauritius companies disappeared, the FIR said.

Sandur power used this amount of `124.60 crore to repay all its bank loans of over `90 crore and floated four subsidiary companies _ Carmel Asia Holdings Ltd, Silicon Infrastructure, Krishna Power Technologies Pvt Ltd and Bhagavath Sannidhi Estates Pvt Ltd' and made large investments in the same. These are allegedly from the bribe amounts routed through Mauritious, the FIR said.

During 2007-08 Jagan allegedly created fictitious transaction of sale of 82 lakh shares of Sandur Power at `675 per share to a host of companies which later merged with Keelawn Technologies Ltd in which Jagan has a major stake. The total amount paid to take over all these companies was a meagre `4 crore while they invested `533 crore in Sandur which allegedly proves that these are nothing but bogus companies used only to launder the corrupt money of Jagan.

The CBI quoted contents of the petitions which said that Nimmagadda Prasad had purchased 21.42 lakh shares at a premium of `650 per share, thereby paying `140 crore to Sandur Power Company. Prasad is the promoter of VANPIC Projects Pvt Ltd to whom it is alleged that more than 15,000 acres of land in Prakasam district was allotted by the state government in violation of all norms.

Another company Bharathi Cements, promoted by Jagan Mohan Reddy, witnessed a miraculous growth because of the investments that had flown into it. Its shares were sold at a premium. Jagan Mohan Reddy and his associates divestd their shares in Bharathi Cements in favour of a foreign company PARICIM SAS, Switzerland and received thousands of crores of rupees.

The investors in the company were five companies of Nimmagadda Prasad, promoter of VANPIC. They put in up to `244 crore in Bharathi Cements. They are: G2 Corporate Services, Suguni Constructions, Alpha Villas, Alpha Avenues and Chilchrist Investments.

As per the FIR, the acquisition of this company by a French company itself raised doubts for two reason: 1) The valuation is quite abnormal and 2) the management is still left by them to Jagan though they are the major stakeholders.

During 2007-08, Dalmia Cements acquired shares at a premium of `1,440 per share whereas after a lapse of one year, Jagan and his associates divested their shares to the French company at `671 per share. Nimmagadda Prasad and his companies, which have got `350 crore capital gained after entry of foreign investor, dutifully re-invested that money in Jagathi Publications.

As many as 13 companies and individuals invested Rs 844 crore in Jagathi Publications by buying shares at a premium of `350 per share while the promoters subscribed to the share capital at par. Among them were Nimmagadda Prasad (`100 crore), Potluri Varapasad (`146 crore), India Cements (`40 crore) and Lanco group (`30 crore).

With regard to Classic Realty Pvt Ltd, Bangalore, it was taken over by Sandur Power from the Mantri group and Malpani group of Bangalore at a premium of `6,687 per share during 2006-07 and from then onwards this was fully owned by Sandur Power.

During its long existence, Classic Realty had transacted just a single deal' it purchased from Mantri Developers a commercial complex in the heart of Bangalore, earning rents of Rs30 crore per year.

It is alleged that Mantri Developers were given benefit by the government to take over Brahmani Infra Tech in the guise of technical collaborator and becoming owners of 250 acres of prime land in Hyderabad near the international airport at `20 lakh per acre against the market value of `1.5 crore per acre.

The acts of these companies and individuals constituted commission of cognizable offences and that Jagan Mohan Reddy had influenced his father and some public servants who abused their position and issued orders favourable to some companies, causing loss to the sate government, the CBI concluded.