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Option One's Rs 1,000-cr bond sale under MCA scanner

N Sundaresha Subramanian/New Delhi 25 Sep 12 | 12:25 AM

The Ministry of Corporate Affairs (MCA) is probing Gwalior-based Option One Industries’ Rs 1,000-crore debenture issue. Earlier, after complaints from investors, the registrar of companies (RoC) had demanded the company submit key documents, a demand Option One did not respond to.

The ministry’s regional directorate at Ahmedabad has already directed the RoCs of Madhya Pradesh and Chhattisgarh to initiate prosecution proceedings against the company. A show-cause notice in this regard was issued on August 30.

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Ministry documents obtained by Mumbai-based activist Bhupinder Singh through the Right To Information Act showed despite repeated requests since May, the company hadn’t provided the details sought by the RoC.

  • An agent said the debentures were available in multiples of Rs 100
  • These could be bought through a career plan or a multi-level marketing plan
  • RoC stated it had received complaints the company was running an illegal money circulation racket
  • It added despite issuing a number of letters, the company did not give any reply, and this led to suspicion
  • The company website lists Aman Verma, R K Shetty, Bappi Lahiri & Samir Agrawal as members of the company’s advisory board

Option One was engaged in “real estate" and would foray into “plot sale" soon, said Mumbai-based promoter Samir Agrawal. “We have responded to the show-cause notice. We are issuing debentures secured through mortgage of properties and have initially placed these with seven to eight companies, who would, in turn, sell these to investors," he said, adding the company had also appointed a debenture trustee. A detailed email questionnaire to Agrawal remained unanswered.

However, there have been complaints the debentures are peddled through agents on a commission basis. Speaking to Business Standard, Ashok, a Bhopal-based agent who peddled these debentures, said, “The debentures are available in multiples of Rs 100 and can be bought through a career plan, through which the seller would earn higher commission or an MLM (multi-level marketing) plan, which involves bringing in new investors."

The registrar, in a communiqué to the ministry’s regional directorate dated August 31, stated it had received complaints “the company is running an illegal money circulation racket under the garb of an investment plan. Despite issuing a number of letters…the company has not furnished any reply, which gives enough scope for suspicion."

The company’s website states, “Option One has been engaged in providing various fee-based services such as fund mobilisation through the issue of debt, equity, structured hybrid instruments, etc, for many clients, including financial institutions and private sector companies." It adds, “Within a short span, Option One has emerged as one of India’s leading companies in the Indian fixed income market through management of private placements. Ranked

No. 1 in private placement of fixed income instruments and among the top three players in the debt market segment, Option One Industries has received various accolades and is playing a very significant role in developing a vibrant bond market in India."

The company had appointed Bollywood actor Aman Verma and singer Bappi Lahiri as its brand ambassadors. When contacted, someone answering Lahiri’s mobile phone said, “He is not in the country." Aman Verma said his contract with the company was limited to brand endorsements, adding he wasn’t aware of the company’s financial structure. He directed finance-related calls to his consultant R K Shetty, a Mumbai-based financial advisor. Shetty said he was an income tax consultant for the Agrawal family and had conducted a seminar on debentures in Madhya Pradesh. “I am not aware of the legality and nature of this issue," he said.

Option One’s website lists Verma, Shetty, Lahiri and Agrawal as members of the company’s advisory board.

Ministry records show Option One was incorporated in March. Since then, it has filed forms for a debenture issue of Rs 1,000 crore. According to the brochure for ‘purchase of debentures’ circulated by the company, which Business Standard reviewed, the debentures could be purchased under three different schemes -- monthly income plans, fixed deposits and recurring deposits. The schemes offered to collect sums of Rs 1,000-1,00,000 for tenures varying from one to 14 years.

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