The Ketan Parekh Scam

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JVG Group - The Background Contd...

Over the next few years, the company brought over 3000 small firms under its control. Sharma also launched JVG Steels, JVG Departmental Stores, JVG Foods, JVG Petrochemicals and many other companies. In 1992, Sharma acquired San Tosha Resorts and India Cero Oil, an oil extraction unit from the Dalmias in 1993. However, most part of the JVG empire was created largely from public fixed deposits. In the early 1990s, Sharma opened branches of his finance companies in various towns and villages. He followed it up with heavy advertising on the interest rates, which were as high as 30%. Investors flocked to buy the company's schemes and the deposit base soon crossed Rs 1000 crore. The JVG group's turnover increased from Rs 102 crore in 1994-95 to Rs 700 crore in 1995-96. Sharma was a man with strong political connections - he was close to politicians from Bihar and was involved with the Dalit Sena headed by the then railway minister Ram Vilas Paswan. It was reportedly through these connections that he was able to make JVG Department Stores one of the largest suppliers of commodities to the Government of India.

Sharma had grand plans for making JVG a Rs 12000 crore empire by 2000. He announced that he would invest over Rs 4000 crore in diverse areas such as power, cement, hotels, steel, textiles and aviation. JVG went ahead with its plans although it came in for a lot of flak in the media. Soon, JVG launched the ‘Avatar' brand of detergent and washing bars in an attempt to enter the FMCG segment. Sharma wanted to set up mega townships in Gurgaon, Patna, Mumbai and Hyderabad, and to acquire the hotel and cement interests of the Delhi-based Jaiprakash Industries, the steel units of Rathi Alloys and the aircraft of ModiLuft.¹

JVG had acquired Orkay's polyester yarn plant and a part of its office space in Mumbai in March 1997 through a tripartite agreement with financial institutions led by IDBI and the Mehras who controlled Orkay. As per the agreement, JVG agreed to pay the Mehras Rs 98 crore in cash and take on the Rs 130 crore liability to the various FIs. JVG paid off Rs 14 crore to the Mehras in March 1997. According to the schedule worked out by the FIs, JVG agreed to pay the second instalment in the first week of September 1997. Although JVG could not meet the deadline, it was allowed to run the plant on job-work basis from September 1997. The understanding was that JVG would pay up by the end of September. However, JVG failed to meet the end-September deadline as well and Orkay sought the intervention of IDBI to take possession of the plant. Production at the plant was suspended in October 1997. Following this, the agreement between the Mehras, JVG and the FIs became null and void.

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1] However, none of these projects materialized. The deals with Jaiprakash Industries and Rathi Alloys fell through. All of the ‘Mera Bazaar' retail outlets opened under JVG Departmental Stores were also shut down.