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Future Generali stake transactions don't add up

Sunday, 25 November 2012 - 9:13pm IST | Place: Mumbai | Agency: dna
Sprint Advisory, which holds 49% stake in Future Generali Life Insurance Company, has posted losses year after year and gets only a paltry income through consultancy services, which has never exceeded Rs5 lakh per annum in the last five years. Still, it has been able to command a 250-time premium.

A company with no asset of its own issued shares to two different companies on the same day. While one company bought the shares at a face value of Rs10, the other paid Rs2,500 apiece.

And these weren't one-off deals. The practice has gone on for five years now – in Sprint Advisory Services Pvt Ltd.

Sprint, incorporated in 2005-06 as a chain marketing company and rechristened as Sain Advisory Services in 2007-08, and further as Sprint Advisory Services in 2010-11, has no employees on record.

What's more, it has posted losses year after year and gets only a paltry income through consultancy services, which has never exceeded Rs5 lakh per annum in the last five years.

Still, it has been able to command a 250-time premium.

What gives?

Well, Sprint Advisory holds 49% stake in Future Generali Life Insurance Company, while Pantaloon Retail India and Maatschappij Graafsschap Holland NV hold 25.5% stake each.

Between 2007-08 and 2010-11, Maatschappij, a little known firm based out of a tax heaven in Netherlands, invested Rs268 crore directly in Future Generali Life, while Pantaloon Retail invested a like amount, to take at 25.5% each.

For the remaining 49% stake in Future Generali Life, Sprint Advisory invested Rs515 crore with an almost equal contribution coming from Maatschappij and Pantaloon Retail.

Maatschappij started investing in Sprint in 2007-08, against which Sprint Advisory issued shares at Rs2,500 a share for a face value of Rs10. As of 2010-11 fiscal end, Maatschappij had invested Rs283.66 crore in Sprint, but got just a 0.4% stake. However, Pantaloon Retail invested Rs283.54 crore in it and commanded a 99.96% stake.

For 2010-11, Sprint registered a loss of Rs15.90 lakh, though its income from consultancy services stood at Rs1.2 lakh and other income at Rs69,000.

To be sure, between 2007-08 and 2011-12, Future Generali Life has attracted investments of Rs1,200 crore from these players, though DNA could only collate the figures till March 2011 as Sprint is yet to file its annual return for the last fiscal.

As these numbers show, despite investing 50% in the share capital of Future Generali Life, Maatschappij holds just 25.5% stake in the company, thanks to the hefty premium charged by Sprint Advisory, in which Vijay Biyani, Future Group chairman Kishore Biyani's brother, is one of the four directors. The other three are Prakash Chandra Toshniwal, Krishnakant Rathi and Roberto Gasso.

For the record, Biyani and Gasso are also on the board of Future Generali Life, as Sprint representatives.

Surely, all this can't be a coincidence; there has to be a game plan somewhere.

Makes one ask – was the Maatschappij and Sprint Advisory transaction done to bypass the norm of a 26% limit for foreign companies in insurance?

A detailed questionnaire sent to Sprint Advisory remained unanswered.

Deepak Sood, CEO, Future Generali Life refused to give any answer.

Curiously, there is little in the public domain about Maatschappij or its key executives.

As per Bloomberg Businessweek, Maatschappij Graafsschap Holland NV was founded in 1975 and is based in Diemen, the Netherlands. Participatie Maatschappij Graafschap Holland NV operates as a subsidiary of Assicurazioni Generali SpA.

It is ironical that the absurd pricing scheme in Sprint was not questioned by the star-studded board of Future Generali Life. Former SEBI chairman GN Bajpai, who is supposed to be an authority on pricing of shares, has headed the board for the last three financial years and Gorakhnath Agarwal, the head of the Acturial Society of India, is on its board and acts as the chief actuary and chief risk officer.

It is also reliably learnt that Girish Kulkarni, one of the pilots of the absurd pricing scheme of Sprint Advisory, working as the chief marketing officer and a director of Future Generali in 2007-08 when Maatschappij started paying the premium for Sprint, now heads Star Union Dai-ichi, an insurance company promoted by a public sector bank.




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