On the joyous occasion of The Indian Government winning the vote in Parliament on FDIin Retail Trade, I have great pleasure in informing my readers how Wal-Mart broke the Law even before entering Indian Market.
The exclusive story by Reuters explains how Wal-Mart surreptitiously entered India and how it lobbied.
Wal-Mart’s Indian joint venture has suspended several senior executives and delayed the opening of some stores in the country as part of an internal bribery investigation, the company said on Friday.
It is the latest in a series of setbacks for the retail giant’s international operations and comes at a particularly sensitive time here because Indian policy makers recently allowed foreign retailers like Wal-Mart to open stores in the country. The investigation seems to have emboldened opposition lawmakers in New Delhi who are trying to overturn the government’s decision on foreign retailers.
The Economic Times was a good venue in India to break this story. In a classic sentence, they painted with a very light brush the problem of corrupt business practices in India:
As companies in India, like in Mexico, are susceptible to pay bribes at various levels to get reams of licenses required to start and operate businesses, Walmart wants to make sure they do business with only those vendors who don’t indulge in such activities.
Reading this you would think that somehow Walmart was a simple bystander in the bribery business both in India and Mexico, as opposed to having paid over $20 million USD in bribes to get its way in Mexico, and an unknown amount in India. The Economic Times and reporter Rasul Bailay are being disingenuous here. When they say “companies in India…are susceptible to pay bribes…to get licenses…to start and operate businesses…” they have to know that this is likely what Bharti Walmart itself was doing and not simply suppliers. Furthermore, If the suppliers were paying bribes to advance their businesses, the bribes would be finding their way into the pockets of Bharti Walmart buyers and executives….
“Robert Vadra’s land deals in Haryana have turned murkier with new evidence suggesting hard cash transactions were made in the guise of a property purchase.
A Headlines Today investigation has unearthed documents which raise suspicion over the authenticity of Vadra’s land deals and the validity of the clean chit given to him by a three-member probe panel appointed by the Haryana government in October last year.
Between 2005 and 2006, Vadra struck four land deals with one agriculturist – Harbans Lal Pahwa – buying a total of 46 acres land in Amipur village in Faridabad district, only to sell it back to Pahwa at a premium five years later.
Vadra signed the land deals overlooking the Haryana Ceiling on Land Holdings Act, 1972, which states that one person or family can buy a maximum of 26.9 acres of agricultural land in the state.
On September 8, 2005, Vadra bought 12 acres of land in Amipur village from Pahwa for over Rs 32 lakh. On January 13, 2006,he bought 19 acres from Pahwa for Rs 54 lakh.
On April 14, 2006, Vadra acquired 10 more acres of land from the same land dealer for Rs 30 lakh. On April 28, 2006, Vadra’s wife Priyanka Gandhi struck a deal with Pahwa for 5 acres in Amipur for Rs 15 lakh.
Pahwa bought the land in three installments in 2010, bearing a loss of about Rs 2.5 crore. The transaction triggered suspicion about Pahwa’s connection with Vadra, and the relationship fell under scrutiny when Headlines Today dug up Vadra’s balance sheets.
The investigation team came across a curious figure of Rs 1.55 crore against the name of Harbans Lal Pahwa.
Documents in the possession of Headlines Today show Pahwa’s company, Carnival Intercontinental Estate Pvt Ltd, had given a loan of Rs 1. 55 crore to Vadra’s company, Skylight Hospitality.
Pahwa also held a directorship in Vadra’s company, Real Earth, for over a year between February 2008 and March 2009″
“According to a tweet on the Twitter handle of news channel NDTV, DLF has said that their dealings with Vadra have been completely transparent. Vadra, on his part, had explained his relationship with DLF to The Economic Timesin March 2011. “I have a good understanding with DLF. Our children are friends, we are friends. They are seasoned businessmen. They are not daft. They are educated, sensible people and are reasonable and shrewd in their business. They don’t need me to enhance them. They’ve existed for years,” Vadra had said. (You can read the complete story here)….
As per an analyst presentation (dated 6 August 2012) made by DLF, the gross debt of the company stands at a whopping Rs 25,060 crore as on 30 June 2012. At the end of 31 March 2012, the gross debt had stood at Rs 25,066 crore. (You can access it here).
The annual report of DLF points out “the company’s borrowings from banks and others have a effective weighted average rate of 12.38 percent per annum, calculated using the interest rates effective as on 31 March 2012 for the respective borrowings.”
So what this means is that the company had debt outstanding of Rs 25,066 crore as on 31 March and was paying an interest of 12.38 percent on that debt. The debt outstanding as on 30 June 2012 had not changed much and was at Rs 25,060 crore. It is fair to assume that over a period of three months the interest rate on the debt outstanding wouldn’t have changed significantly.
What is also interesting is that during 2011-2012 (i.e. the period between 1 April 2011 and 31 March 2012), the sales of the company stood at Rs 4,582.67 crore. This means that the debt of the company is nearly 5.5 times its annual sales, which is extremely high.
The question that DLF needs to answer is that why is a company which has such huge outstanding debts, paying an interest of 12.38 percent per year on it, giving out interest-free loans? Also it seems to have been having trouble in bringing down its outstanding debt. The outstanding debt between March and June 2012 has gone down by only Rs 6 crore.
The company has been trying to bring down the debt by selling investments that it had made over the last few years. It recently sold a plot that it owned in Lower Parel in Central Mumbai to Lodha Developers for Rs 2,750 crore. The company has been trying to sell several of its other investments over the last few years..’..
“Independent directors of DLF have said the controversial transactions between Robert Vadraand India’s largest realty firm were not discussed by the board and if allegations of easy loans and cheap deals are proved, they should be probed.
“The matter was not flagged off at any board meeting. We have not come across any such instance where favours have been done. It’s not come to our notice. It is not possible to look at each and every sale transaction. But we try to ensure that all transactions are done at market prices,” said KN Memani, an independent director at DLF, and former chairman of Ernst & Young India”.