Hope all is fine and you have no
outstanding from the Shardha Group of Cheating Companies. If yes than,
my heartfelt condolences. Although the West Bengal politicians want that
the residents of the state to smoke more (strong contender for case study at London school of Economics) and pay for lapses but all said and done it will be a long process by which you can get a part of your investment back.
One bad decision, one bad advice, one bad selection and one bad result.
These so called investment avenues called by legal names and working
under the legal framework of Collective Investment Schemes” such as Chit
Funds, Multi-level Marketing or Deposit Raising companies have eroded
the common man’s wealth and then also people fall prey… again and again.
Why does a scheme defaults?
1) It is made to cheat and siphon
off money from general public. The promoters of the company have no
business plan but they know that if they can mock a business plan they
can get investors and then they can exit taking cash and other assets.
2) The company started with a plan
but could not settle and planning failed. Promoters do not want to
accept failure or they have their credibility, brand or other business
at stake so they do not consider winding up legally instead prolong the
affairs by window dressing books, media play and false commitments.
The type 2 is easy to know as they are
established companies going a down fall. The information regarding these
companies is wide spread as they have been operating for good amount of
time. Sometime these companies have sister concerns listed in stock
exchanges and the financial data is known to general public. By studying
these data and a bit a research from market experts can be helpful to
know about the real motives of the promoters.
How to identify a Runaway Bride?
It is tough to identify the type 1
companies. Although difficult but there are few ways and parameters to
identify a scheme which is going to default or run away. These ways are:
1) Over the market returns:
These companies offer over the market returns. Returns act as stimulus to greed. You offer a rate which is 4-5 % of bank fixed deposit
rate, people find it attractive. Even the retiring uncle will be tempt
to put 20% of his retirement kitty in these companies, explaining
himself that the company won’t run and even if it runs away I will be
ruined by 20% of net worth only and that will be a god willing event.
Just ask question to yourself that when Banks are flooded with
liquidity, why doesn’t the company take a bank loan and pay interest
which will be less in comparisons to what they paying to public. The
reason is simple that bank has access to financial information and
credit worthiness of the company and they are not willing to take a risk. But public has high appetite of risk. Isn’t it.
2) Over the market middleman’s commission:
These companies offer very lucrative
commission ranging from 2-6% as per target achievement. The agents also
get freebies like holidays on resorts, vehicles like cycles to car,
gadgets and achievement awards nights (read: free alcohol drenched
parties often presided by Bollywood’s B grade actresses, handing over
shining trophies). Also in rural areas normally an influential person
like teacher or village headman is appointed as agent so that people get
influenced by the person also.
3) Business Plan:
These companies normally do not have a
business plan or may have one or two unit operating on small scale to
cover up for the existing business. An upcoming hotel & resort
chain, a media house, a precious commodity which only few can bring
underneath the land, a thousand of acre of land near Mumbai, sudden
demand of some green herb in US or Europe are some examples of the
business objective that are displayed in general public. The idea will
be that the line of business will have low awareness, so most people
believe what is told since they lack questions and facts. Sometime play
is made around cost also that company is making and X product in 50
percent less cost in comparison to competition hence benefit is passed
to the stakeholders. As Warren Buffett said, do not invest what you
don’t understand. Stick to this basic rule.
4) Strong nonexistence guarantees:
When an investor question the risks involved the agent or the company lay false guarantees in form of cash reserve, gold
reserves or the land bank in the name of the company. They make the
size of your investment to peanuts and make you believe that company has
lakhs of depositors investing crores of rupees and they are paying each
one of them since so many years. Guarantees are often perceived
guarantees when celebrities are brought (read: bought) in to inaugurate
the company offices. Respected people or politicians are used as board
members or called chief guest in functions. The brochure and wall of the
company offices will full of such photographs specially clicked for
these purposes.
5) Dubious in where about:
When you ask about the company office
the first response is that company has offices in every main city of the
country. The address provide are either nonexistent or belong to group
companies. The real promoters do not come in open very often and let key
employees handle the affairs. There addresses and verifications are
usually wrong and sometimes foreign addresses are provided so that it
becomes difficult to trace. Even the assets which company says belong to
them are not specified. The promoters also may have shoddy past and
seem to be changing business very frequently. After Shraddha instance,
my eyes too blinked when I came to know that promoter’s father also ran
same kind of cheating business and to avoid connection he went for a
plastic surgery!
6) Modus operandi:
The business starts with full fanfare.
No stone is left unturned- glossy brochures, website, employees all
things are lined up. Initial investors and agents are rewarded in
ceremonies. The big cheques of interests and commissions are paid in
front of media to establish a brand. Big advertisements appear to
appoint agents and franchisees. Company pays dues for few years through
the Ponzi mechanism and they wait till the debt book swells to millions.
Then all of sudden the cheques are dispatched late, then they are
dishonored by the banks for insufficient payments. And before media and
public make noise, the promoters get themselves under ground or leave
India. Agents surround offices to shift blame of their foolishness and
greed on company only. The investor as usual cribs on his luck (not on
his irrationality and ignorance). Finally the lawmen arrives and a long
legal battle starts to get the money back, or at least a part of it.
Returns are dependent on Risk taken.
But is the risk of this nature worth to be taken to earn a some more returns?
~
Source : tflguide
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