How money is made in real estate in India -Version 2

I had blogged earlier about how Kanda made a fortune in real estate.In an amazing article in BS,Dasarath Reddy exposes how Matrix’s Prasad set about making his killing in real estate in Andhra Pradesh.

It all started way back in 2008, when Andhra Pradesh government entered into a memorandum of understanding (MoU) with the emirate of Ras Al Khaimah. The MoU was for developing a port and an industrial corridor project called Vadarevu and Nizampatnam Port Industrial Corridor (Vanpic), respectively, involving two small ports on 4,000 acres each on a build, own, operate and transfer basis.

Prasad entered the picture when his company, Matrix Enport Private Limited, formally joined as RAK Investment Authority’s (RAKIA’s) India partner for the development of the project with the former holding 51 per cent equity in the special purpose vehicle (SPV), Vanpic Port Private Limited.

Following the approval of the proposal by the state cabinet headed by YS Rajasekhara Reddy, the infrastructure and investment department, the nodal agency for the project, signed a concession agreement with the SPV.

Deviations started with the concession agreement wherein Vanpic Port Private Limited was confined to the development of port while Vanpic Projects Private Limited, created by Prasad, was roped in as the developer of the industrial corridor on 24,000 acres, with absolute rights over the land.

The government issued orders for acquisition of close to 12,000 acres, including the land earmarked for the ports in favour of Vanpic Projects. Subsequently, the company added three more SPVs — for ship-building, power venture and an airport project.

According to the CBI chargesheet, a copy of which is with Business Standard, Prasad changed the name of Matrix Enport Private Limited to Vanpic Projects Private Limited only to grab the land deceptively, as the name sounded similar to the original SPV.

The people in the government facilitated his plans, says the CBI: “The specific recommendation of the Empowered Committee headed by Chief Commissioner of Land Administration (CCLA) to alienate lands in favour of Vanpic Ports Private Limited was wilfully violated by the minister (D Prasada Rao) and the principal secretary (M Samuel). They facilitated wrongful alienation of lands in favour of Vanpic Projects Private Limited and thereby committed criminal breach of trust,” the chargesheet said.

The equity holding in the project then came into question. The CBI found that RAK had 51 per cent equity in just Vanpic Ports and Prakasham Airport Private Limited, also indirectly controlled by Prasad.

“According to business agreements with RAKIA, Prasad intended to secure 70 per cent equity by virtue of his participation in Rak Infra Holding limited, a Mauritius-based company, in which he had 42 per cent stake,” it said.

The government-to-government agreement was used as a mask to grab the project without any due bidding process, according to the CBI.

All the funds came into India on behalf of RAKIA, which received them from RAK Infra Holding and RAK Vision Limited, another Mauritius company. Prasad is the authorised signatory of the bank accounts of both the companies.
In 2010, Prasad started plans to sell the land. While the AP government alienated land at Rs 73,000 per acre, Prasad intended to sell the same at Rs 12.5 lakh per acre by entering into an agreement to transfer 700 acres to Coastal Sirohi Limited and 900 acres to SEW Thermal Power Corporation. He received advance from both the companies, according to the CBI.

In 2011, Prasad engaged Jones Lang LaSalle Property Consultants, which valued the 12,973-acre land held by Vanpic Projects at Rs 1,426 crore, whereas they were actually bought at Rs 165 crore, the CBI said.

This is not all. Prasad had diverted the FDI, said to belong to RAKIA of Rs 428.72 crore in two spells for his personal use on the pretext of advance purchase of lands located at places like Visakhapatnam and Hyderabad, far away from the port project, amounting to criminal breach of trust. Of the Rs 278 crore taken as land aggregation advance in the first spell by Prasad’s companies, Rs 140 crore was invested in the companies of Jagan, the prime accused in the quid pro quo case, it said.

Prasad, who sold Matrix Laboratories for Rs 915 crore in 2007, had floated about 20 other companies with his family members and employees as directors between 2004 and 2008 only to overcome urban and agriculture land ceiling Acts as he had heavily invested in immovable properties, the investigative agency believes.

On the quid pro quo between Jagan and his father, who was at the helm of the government, the CBI said the government favours received by Prasad in exchange for his ‘investments’ into the former’s companies was not just confined to Vanpic Project alone. For example, he had got exemption from the Urban Land Ceiling Act provisions on the 5,764-square metre held by his family members.

His relationship with Jagan started in 2006 with his first investment of Rs 20 crore in Carmel Asia Holdings Limited Private Limited owned by Jagan. Subsequently, he made a total investment of Rs 854.50 crore in seven of Jagan companies, including Jagathi Publications, which operates Telugu daily Sakshi and a television news channel by the same name.

The CBI has also alleged that Prasad had disposed of unusable and non-core assets of Matrix Laboratories to his own companies and, thereby, he wrongfully gained Rs 72.50 crore. “It is also revealed that Prasad had concealed his interest in the transaction of land to the board of Matrix Laboratories Limited for which he acted as the chairman,” the chargesheet said.

RBI Governor’s Zero Sibal Moment

Kapil Sibal earned the sobriquet of “Zero Sibal” for saying on National TV that there were no losses due to the 2G spectrum sale by Raja.

Now RBI Governor Subbarao is following Zero Sibal’s footsteps

When asked about the issue of loss incurred by not auctioning the spectrum, Subbarao – who was Finance Secretary between April 30, 2007 and September 4, 2008- is learnt to have said that while there was no loss to the exchequer, even if there was, it was only notional in nature. He said there was no monetary loss in actual terms. “Much depends on perception,” he is learnt to have told the JPC.-from the BS

Mamata SMSes Sonia

Mamata Banerjee in her press conference yesterday said that she SMSed Sonia Gandhi asking her to rollback the diesel hike etc.But Sonia did not respond.

Isn’t it amazing that the Chief Minister of one of the post populous states in India communicates with the Head of the ruling coalition via SMS?Why can’t they just pick up the phone and talk to each other?

SMSes are notorious for their security imperfections.What if somebody intercepts/hacks these SMSes and alters them?

The lack of communication between these two powerful women is astonishing.No wonder UPA 2 in its present avatar has been unable to govern.

Maybe both these ladies need to learn from Govinda “What is your mobile number?Karni hai friendly baatein, give me your dial number !!”