Piyush Goyal, India’s railways and coal minister at a business summit. (Photographer: Anindito Mukherjee/Bloomberg)

Ajay Piramal Buys Piyush Goyal’s Company Only To Sell Most Of Its Assets In Months

Why did Ajay Piramal buy Piyush Goyal’s company, Flashnet Info Solutions, in 2014? The Piramal Group told BloombergQuint it acquired the Goyal company “not just for its real estate assets but more for its investments in other companies”.
If that’s the case then why did Piramal sell those assets within months of purchasing the company?
The answer to that question is simply not forthcoming. The deal valuation is also not fully clear, BloombergQuint found after parsing data on the company’s assets.

Here’s what happened...
In July 2014, leading businessman Ajay Piramal’s family-owned Piramal Estates Pvt. Ltd bought Flashnet Info Solutions (India) Ltd., a private company owned by Goyal and his wife Seema, for Rs 47.8 crore.

The transaction was first reported by the Wire in a recent story that also raised questions about alleged inadequate disclosures by Goyal. Goyal, treasurer of the Bharatiya Janata Party, was in May 2014 appointed Minister of State for Power, Renewable Energy in the just-formed Narendra Modi-led government. The Flashnet acquisition was finalised around the time he was appointed minister.

Goyal has contested the Wire’s allegations. He told newspaper Times of India that since he and his wife had exited the company at the time of filing his asset details as a minister, there was no mention of Flashnet in the filing.

That’s a straightforward explanation.

What’s confusing is why Piramal bought Goyal’s company, especially at the valuation it did.

This is what BloombergQuint found when it dug into public filings made by Flashnet and Piramal Estates, the acquiring company. These filings were accessed on the Ministry of Corporate Affairs - MCA21 website.

The Beginning Of Flashnet

Flashnet Info Solutions (India) Ltd. was incorporated on March 23, 2000 with an equity base of 50,070 shares, of face value Rs 10 each. The principal shareholders were Piyush Goyal and his wife Seema Goyal. Both were also directors of the company.

At the time of registration, the company’s principal business was listed as internet solution and service provider and consultancy services.

As of fiscal year 2012-13, the consulting business was the only revenue contributor, with Rs 4 crore in annual income. Interest and dividend income and sale of investments contributed another Rs 4.53 crore. That year Flashnet had a profit of Rs 5.47 crore and reserves and surplus of Rs 13.62 crore.

By financial year 2013-14, just before the sale to Piramal, Flashnet's consulting income was down to zero, dividend income had halved and the sale of investments garnered over a crore of rupees.

In response to BloombergQuint's questions, the Piramal Group confirmed that Flashnet had not pursued its consultancy business from April 1, 2013 onwards. That can probably be explained by Goyal’s preoccupation with the general elections in May 2014, though BloombergQuint received no response from Goyal on the queries raised.

Why Did Piramal Estates Buy Flashnet?

In May 2014, the Goyals stepped down as directors of Flashnet. The next month Piramal Estates’ board approved the purchase of the Goyal-owned company. The transaction date was July 24 and Flashnet’s shares were transferred in September that year.


If Flashnet had neither consulting nor internet solution and service business, and no operating revenue, then why did Piramal Estates buy it?

For the sake of its assets, said Piramal to BloombergQuint.

Piramal Group, with its long track record of acquiring businesses/making investments, constantly evaluates new opportunities/investments. Piramal Estates purchased Flashnet not just for its assets in real estate but more for the investments made by it in other companies which the group believes are good investments in the current as well as in the long run.
Piramal Group Statement


At the time of the sale, the assets owned by Flashnet were:

  • Real estate: flats and accompanying land in Delhi.
  • Quoted investment: investments in listed companies.
  • Unquoted investments: investments in unlisted companies.
  • Current investments in mutual funds.
  • Cash and cash equivalents.


Flashnet - Real Estate

Between FY11 and FY13, Flashnet advanced over Rs 4 crore towards an under-construction flat in Delhi. The money was drawn from its reserves and surplus.

Piramal confirmed that at the time of acquisition of Flashnet in July 2014, the Goyal company “owned 535 sq. mtr. flat (along with 141 sq mtr. of ownership on the land), located in Shanti Niketan, New Delhi (Category A property)”.

Flashnet's FY14 balance sheet stated the post-depreciation net book value of the flat at Rs 5.47 crore. Piramal told BloombergQuint the fair market market value of the property as on July 24, 2014 (the sale date) was Rs 10.10 crore.

Curiously, barely a year after selling the company, Goyal repurchased the flat from Piramal Estates. This was confirmed by Goyal to newspaper Times of India and by Piramal in its responses to BloombergQuint.

“The property valued at Rs 10.10 crore in July 2014 was sold at Rs 12.02 crore in 2015,” said the Piramal statement.


Flashnet - Equity Investments

As mentioned earlier, Piramal stated in its response to BloombergQuint that it bought Flashnet “more for the investments made in other companies”. These investments were in both listed and unlisted shares.

At the end of FY14, Flashnet had investments of book value Rs 1.81 crore in three listed companies.
Their market value as on July 24, 2014 (sale date) was Rs 4.47 crore.
Most of it was attributable to Pradeep Metals Ltd. And some to C&C Construction Ltd.


Pradeep Metals is a Mumbai-based company founded by the Goyal family and in the business of high quality steel forgings. Co-founded by Ved Prakash Goyal and Pradeep Goyal in 1982, the company's revenue for FY17 was Rs 121 crore and it turned a net profit of Rs 5 crore.

C&C Construction is a Gurgaon-based company founded in 1996 and in the business of road and urban infrastructure construction. It earned a revenue of Rs 933 crore in FY17 and a net profit of Rs 34 crore.

Edelweiss Capital, now known as Edelweiss Finance Services, is part of the well-known Edelweiss Group that is involved in several financial sector businesses, from investment banking to lending to asset reconstruction.


As for Flashnet’s investments in unlisted companies—it held equity shares in six companies as well as preference shares in one of them. The total book value of these investments in FY14 was Rs 2 crore. Piramal did not share the fair market value of these investments in July 2014.


Flashnet - Cash In Hand

At the end of FY14, Flashnet had current investments worth Rs 65,524 in mutual funds. It also had trade receivables of Rs 2.74 crore and cash and cash equivalent of Rs 1.68 crore.

Flashnet’s Valuation


At the end of FY14 Flashnet's assets were worth:

  • Real estate: Book value Rs 5.47 crore.
  • Quoted investment: Book value Rs 1.81 crore.
  • Unquoted investments: Book value Rs 2 crore.
  • Current investments in mutual funds: Rs 65,524.
  • Trade receivables: Rs 2.74 crore.
  • Cash and cash equivalents: Rs 1.68 crore.


Remember, the sale price was Rs 47.8 crore.

The mutual fund investments, trade receivables and cash add up to Rs 4.42 crore. Hence, it is fair to deduce that Piramal Estates paid Rs 43.43 crore for the remaining assets.

As of July 24, 2014, the market value of the listed shares was Rs 4.47 crore. And as per Piramal's statement to BloombergQuint, the market value of the real estate was Rs 10.10 crore.

Rs 47.8 crore - (Rs 4.42 crore + Rs 4.47 crore + Rs 10.10 crore) = Rs 28.81 crore

That indicates Piramal Estates paid Rs 28.81 crore for Flashnet's investment in shares of six unlisted companies.

Curiously, within months of acquiring Flashnet, Piramal also sold most of the equity investments. Even though in its statement to BloombergQuint Piramal was clear that it purchased Flashnet “not just for its assets in real estate but more for the investments made by it in other companies” and went on to say these were “good investments in the current as well as in the long run”.

The quick sale aside, the deal valuation is also perplexing. Because Flashnet sold all of the listed investments and four of the six investments in unlisted shares for Rs 7.95 crore.

Most of this Rs 7.95 crore can be attributed to the value of listed shares, which at that time was ascertained to be Rs 4.47 crore. That suggests the remaining Rs 3.48 crore were proceeds from sale of unlisted shares.

Why did Piramal pay Rs 28.81 crore for unlisted equity investments when the sale of most of them yielded just about Rs 3.48 crore?


Unless of course Flashnet’s two investments – in Fontus Water and Syniverse Technologies – were the most valuable and accounted for the remaining Rs 24 crore.

Since these companies are unlisted, BloombergQuint was not able to confirm their valuation. The Piramal Group refused to disclose their valuation either. It said the fair market valuation of Flashnet's assets was done by an independent accredited chartered accountant, but did not share the valuer’s name.

Piramal also clarified that the Piramal family had funded Piramal Estates' acquisition of Flashnet as at the time the acquiring company was loss-making and had negative reserves.

BloombergQuint asked if the transaction was structured to reduce tax liability on sale of real estate, Piramal said no it wasn’t.

Unanswered Questions

And yet, this 2014 transaction between Piramal and Goyal leaves three critical questions unanswered...

Why did Piramal buy Flashnet and then in a matter of months sell the company’s key real estate property back to Goyal?

Was Flashnet's investment in unlisted shares worth Rs 28.86 crore?

If Piramal’s main interest in Flashnet was the equity investments, then why sell most of them, also in a matter of months?

Simply put - why did Ajay Piramal buy Piyush Goyal’s company?

BloombergQuint received no comment from the office of Piyush Goyal, currently serving as Railways Minister.

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