Loans raised by Nirav Modi via Punjab National Bank were used to invest as foreign direct investment in Modi’s own flagship firm Firestar International. And he did it with the help of his sister Purvi Mehta.
That’s what the Enforcement Directorate has alleged in its chargesheet against Modi and others. BloombergQuint has reviewed a copy of the document that gives details of the money trail spanning nearly seven years and winding through India, Dubai and Hong Kong.
Modi and his uncle Mehul Choksi of the listed Gitanjali Gems Ltd. still allegedly owe Punjab National Bank about Rs 13,000 crore in what’s being termed as India’s largest banking fraud. The lender said firms related to the two jewellers had obtained allegedly fraudulent guarantees, or letters of undertaking, to borrow funds overseas in connivance with some employees at one of its branches in Mumbai. Both had fled the country by the time the nation’s second-largest public-sector lender reported the fraud to exchanges in February. The ED is expected to file a separate chargesheet against Choksi.
BloombergQuint awaits responses to queries emailed to Modi, his lawyer and to Punjab National Bank. Mehta and others named in the chargesheet couldn’t be reached.
The So-Called FDI
Modi planned to take India-based Firestar International Pvt Ltd. public in 2018. He converted it from a private into a public limited entity in December 2017.
Prior to that in May 2017, the board of Firestar International approved raising $75 million (Rs 495 crore) from overseas entities, according to filings with the Registrar of Companies. Firestar International sold 9.83 percent stake to overseas bodies at Rs 510.22 apiece, valuing the company at Rs 6,908 crore.
Companies selling stake to overseas investors is common. Except, in Modi’s case, the overseas investors were his own companies and the investment funds were courtesy PNB.
The ED’s chargesheet details how Modi’s six dummy companies in Dubai, which borrowed loans based on PNB’s letters of undertaking, diverted $50 million to Lili Mountain Investments, in which his sister Mehta was a director. Lili Mountain routed these funds through two companies—Forecom Worldwide Investment and Jade Bridge Holdings Ltd. —to invest in Firestar International as FDI.
“These companies were used primarily to layer the funds and to obfuscate the real source which is the fraudulent LoUs issued from Punjab National Bank,” the ED alleged.
Besides this the chargesheet also details the size and scale of the scam. One bank guarantee was issued by PNB every two days for about seven years. Modi ran a web of 35 companies in at least three nations and overtime raised Rs 24,000 crore worth of loans, a fourth of which he has yet to pay back.