The promoter is on the run, several top executives have quit in the last few days, employees reportedly have been asked to leave at short notice, and the stock price has halved. Once a leading diamond jewellery firm in India, Gitanjali Gems seems to have lost its sheen. And how.
Troubles began when the name of Gitanjali's chairman, Mehul Choksi, first cropped up in an FIR filed by the CBI in relation to an alleged scam at the state-owned Punjab National Bank; luxury diamantaire Nirav Modi was at the centrestage of the controversy. Choksi happens to be Modi's uncle.
The first FIR filed in January states that Nirav Modi, Nishal Modi (Nirav's brother), Ami Modi (Nirav's wife) and Mehul Choksi, all partners in Diamonds R Us, Solar Exports and Stellar Diamonds, in conspiracy with two officials of the bank and other unknown persons, committed the offence of cheating against PNB and caused a wrongful loss.
Since then, several premises linked to Choksi's businesses have been searched by investigative agencies. Last week, the income tax department attached nine bank accounts of Gitanjali Gems, its promoter and others, the PTI reported.
Even as Choksi has remained untraceable, several top executives have left and employees too have reportedly been asked to look for jobs elsewhere.
“We have been told the company is closing. HR department has only verbally communicated that we have to leave in a week,” an employee of Gitanjali Gems told THE WEEK.
There is a worry that employees will not receive the February salary as the bank accounts have been sealed.
Top management of the company couldn't be immediately reached for comment.
On February 13, Gitanjali's company secretary and compliance officer Pankhuri Warange resigned. Two days later, on February 15, chief financial officer Chandrakant Karkare put in his papers.
“The recent event unfolded in the organisation requires the company to make disclosures under the Companies Act 2013 and the SEBI requirements 2015. I have advised the management on the required disclosures to be made...There is, however, no consensus in my opinion on the disclosures to be made and that of the management, and in these circumstances, my conscience doesn't permit me to continue with my position,” Warange said in the letter addressed to the chairman and managing director, a copy of which was also sent to stock exchanges.
The absence of disclosure will have ramifications, not just on the company, but also on key management personnel, Warange added.
In a separate letter, Karkare had said that his wife recently underwent a major surgery and the post operation recovery had not been up to the expected level, and that had restricted him carrying out his responsibilities as CFO.
On February 7, the company had sent a notice to exchanges where Choksi had clarified that he retired as a partner of Diamonds R Us in 1999, and has had no association or dealing with it since. He also had nothing to do with the other firms namely Stellar Diamonds and Solar Exports, he added.
However, there has been silence since, and there has been no clarification—either from the company or Choksi—even as the scope of the investigation in the alleged Nirav Modi fraud has widened.
Gitanjali Gems reported a consolidated net profit of Rs 64 crore for the quarter ended September 30, on total income of Rs 3,902 crore.
On February 18, S. Krishnan resigned from the audit committee and board of Gitanjali Gems after the company failed to arrange a board meeting to discuss its quarterly earnings for October-December.
Krishnan, in his letter dated February 17, had said that they had not come across any irregularities during presentations in meetings through the reports of the company or by the auditors. However, in the wake of the PNB scam linking Gitanjali, he had sought a board meeting by February 28 to clarify that the accusations were baseless and how the company's operations are “above board.”
Subsequently, he too resigned as independent director.
“I notice that the KMPs of the company relinquished their position and there is no one to organise a board meeting in the company or give clarifications. Accordingly, I feel there is no purpose in waiting till February 28. Hence I submit my resignation,” he wrote.
On Tuesday, protests were held in Hyderabad after the Gitanjali Gems Park near the city was closed following a raid by the Enforcement Directorate, news agencies reported, stating that 600 families were affected by the move.
Shares of Gitanjali have taken a severe beating amid all this. The stock closed at Rs 62.85 on February 12. The stock price has since more than halved. On Wednesday, it was down 10 per cent and closed at Rs 27.45 on the BSE.