South Africa's IDC Sues Gupta-Linked Firms to Recover Debt

(Bloomberg) -- South Africa’s Industrial Development Corp. is suing four companies linked to the politically connected Gupta family after they failed to repay a loan that the state-owned development financier canceled because it suspected illegal activity.

The Guptas’ Oakbay Resources and Energy Ltd., Oakbay Investments Pty Ltd., Action Investments Ltd. and Shiva Uranium Ltd. owe the IDC 287.5 million rand ($21 million) in principal and interest and are also liable for the institution’s legal costs, the Johannesburg-based development finance institution said in court documents stamped Nov. 30. The amount is made up of 37.5 million rand of the outstanding loan and the rest is interest, according to the IDC.

The IDC canceled its original 250 million-rand loan agreement, signed more than seven years ago, on Nov. 10 after it said the Gupta companies breached the pact by possibly being involved in fraud. Ronica Ragavan, a director of Oakbay Resources, declined to comment on the IDC court case when called on Tuesday and referred queries to an Oakbay email account. There was no immediate response to emailed questions.

The family’s firms have also been in court this year to try to stop India’s Bank of Baroda from closing their South African accounts. The facilities are all the Guptas have left after lenders operating in the country terminated relationships with the family in 2016, citing concerns about alleged money laundering. The Guptas, who are friends of President Jacob Zuma and in business with one of his sons, have denied wrongdoing.

Share Manipulation

“We have to take allegations of fraud very seriously and pursue the recovery of public monies vigorously and using all legally available means to do so,” Economic Development Minister Ebrahim Patel said about the IDC’s battle with Oakbay at the end of last month. 

The IDC ended up owning shares in Oakbay Resources because the financier agreed to restructure the terms of its loan and take on equity as payment. Oakbay first started trading at 10.08 rand a share in November 2014, giving it a market value of more than 8 billion rand. The stock delisted in July this year at 5.80 rand a share following the resignation of its auditors and listing sponsors. 

The IDC was persuaded to invest in Oakbay off what appears to be false statements and manipulation of the company’s share price, it said. The IDC now wants to give back its 28.5 million Oakbay shares.

South Africa’s Financial Services Board is probing share movements from when Oakbay listed in 2014 through April 2015 to determine whether the price was manipulated, it said Dec. 6. The Guptas lent money to a Singapore firm ahead of the listing to be used to trade the equities and help set the price, according to a trove of documents seen by Bloomberg.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, Antony Sguazzin

©2017 Bloomberg L.P.