It is ironical that Shree Ashtavinayak Cine Vision is producing a movie called Mr. Fraud 2013 and that they are themselves accused by their minority shareholders of perpetrating a scam and fraud.
Shree Ashtavinayak Cine Vision was at one time the stock market’s darling. With block buster movies like Kidnap, Funtoosh, Bhagam Bhag, Golmaal Returns, Jab We Met etc it was everybody favourite entertainment stock.
Leading brokerages like Emkay Research couldn’t stop praising Shree Ashtavinayak Cine Vision and painted rosy targets. When the stock was quoting Rs. 239 in June 2007 (pre split and bonus), Emkay Research predicted a price target of Rs. 352 for Shree Ashtavinayak Cine Vision.
Networth Stock Broking was even more gung-ho about Shree Ashtavinayak Cine Vision, claiming that its net sales would grow at a CAGR of 108% and that the net profit would grow at a CAGR of 87% over the period FY 2008 to FY 2010. “Buy Now For A Price Target Of Rs. 557” Networth implored investors in April 2008.
Incredibly, these predictions did come true because after a 1:10 split, a generous dividend and 1:4 bonus, the stock spurted to a life time high of 51.20 in November 2010. Naive investors plunged in and bought more and more even as the promoters lightened their load on the stock.
After that, the stock had a near vertical fall and plunged to an all-time low of Rs. 2 in August 2012. The reasons for this precipitous fall are not at clear. The brokerages which painted rosy targets for Shree Ashtavinayak are now maintaining a deafening silence.
It is not surprising then that a number of disgruntled shareholders who must have bought Shree Ashtavinayak Cine Vision at its peak or during the downward journey should feel that they have been cheated by the management.
Mumbai Mirror reports that the minority shareholders are led by Rita Shah, a share trader from Vile Parle, who has filed a petition in the Company Law Board against Ashtavinayak alleging a “massive fraud” of nearly Rs. 400 crores. Rita Shah claims that Ashtavinayak has transferred huge cash reserves to its Dubai-based subsidiary, leaving Ashtavinayak with almost Rs 300 crore of debt. She also claims that there is some foul play on the part of the promoters who have reduced their shareholding in Shree Ashtavinayak from 48.55% to 5.27%. The allegation is that there is a “pump and dump” operation by Shree Ashtavinayak’s promoters.
Sadly, instead of coming clean on the shareholders’ complaints as any self-respecting corporate would do, Shree Ashtavinayak has unleashed its dirty tricks department on the poor shareholders. It filed a police complaint claiming that some of the signatures obtained while filing the CLB Petition were a forgery. When the Police did not take action, Shree Ashtavinayak used its might to file a complaint against the Police with the Magistrate and compelled them to file a case against Rita Shah and the shareholders for criminal conspiracy, forgery, cheating and more. The poor shareholders had to run around to get bail and avoid getting arrested.
It is obvious that what Shree Ashtavinayak is hoping is that the immense police pressure that it is bringing on the shareholders will cause them to wither away and break ranks and not pursue their complaint with the Company Law Board.
This is really an unfortunate state of affairs and adds insult to injury. The poor shareholders have lost their hard-earned money and are now being hounded by the Police. The correct thing for Shree Ashtavinayak to do, if everything is above board, is to answer the shareholders’ grievances and explain what the transactions are and why there is no fraud as alleged. It can’t go about this way using strong-arm techniques against the shareholders unless, of course, there is something that they desperately want to hide.