Let us talk about the downfall of Pappoo and the collapse of his family empire. We are not being derogatory about any public figure, but are talking about Mehul Chokshi, the mega fraudster, the dubious promoter of Gitanjali Gems, who has cheated dozens of banks/lenders for over Rs.14000 cr. and is now safety settled in Antigua Caribbean, with no news about his extradition to India, to face the law here. Mehul Chokshi is widely known as Pappoo in Mumbai’s diamond industry, maybe affectionately or sarcastically because those who knew him, used to confidently predict his collapse, even a decade before he ran away from India in December 2017. Pappoo, took over his father’s diamond company, which was set up in the 1960s, which was till then focussed on diamond trading. But like his dubious nephew Nirav Modi, who is presently locked in a British jail, he had much bigger ambitious. He wanted to be the Louis Vuitton/Cartier of India and he made an ambitious foray into diamond jewellery manufacture and retailing, for which he hobnobbed with the Aishwarya Rais and Kareena Kapoors of India, to build glamour around himself and his many brands.
The entire foray of Mehul Chokshi into jewellery retailing was unprofitable and he was continuously losing money from its very start. But with the help of colluding auditors and bankers, he hid these losses, showed a rosy picture for years and kept borrowing to fund his scammy dreams, which finally collapsed, under the deadweight of debt, leaving a trail of unpaid lenders, vendors, employees and taxes, with all the investigating agencies such as CBI/SFIO/ED/ITD on his tail, and the unanswered question, as to who was his godfather in the system, that let him cheat the system and finally let him run away too, with the huge loot, that he is now enjoying in Antigua. The last that we saw him was in a video a few months ago, claiming that he had a threat to his life and thus was unable to return to India.
His flagship company Gitanjali Gems, is finally headed for liquidation with dues of almost Rs.13000 crores to 31 lenders and frustrated bankers saying that it is now not even worth spending on an insolvency professional to keep the company alive and examine options to recover their dues. Bankers are clearly resigned to their fate. All the investigative agencies are probing this giant scam, but apart from the 41 properties belonging to Mehul Chokshi, said to be worth Rs.1210 crores, which have already been seized by the ED, these agencies have collectively not been able to unearth any further assets of Pappoo and his companies, which would help the lenders to recover their dues. A huge loss to the lending banks of Gitanjali is imminent in respect of their giant exposure to the company.
That gets us to the pathetic state of the ordinary shareholders of Gitanjali, whose investments in the company have turned worthless. The manipulated share price of Gitanjali Gems at one time was Rs.600 per share, and today it has fallen to a mere Rs. 1 per share, with trading suspended. Thus shareholder wealth in Gitanjali has been reduced to NIL. India has been witnessing a spate of high profile corporate failures or mismanagement due to which it is not just lenders have lost money, but so have shareholders in those companies. Shareholders of ILFS, Jet Airways, RCom, Gitanjali have virtually lost their entire capital, and those of ICICI Bank, Yes Bank, Sun Pharma etc. too have witnessed a huge erosion of their wealth due to blatant mismanagement by promoters and directors. What we are witnessing is that the biggest of corporates in India, are sitting on suspect financial statements and finances and when their scammy and manipulated state of affairs are not any longer manageable through deceit, they simply collapse irretrievably, leading to evaporation of shareholder wealth. Apart from bankers, who suffer due to such corporate frauds, the biggest victims are the retail individual investors, whose only fault is that they trusted balance sheets signed by the most well known auditors and independent directors, not knowing that they are deliberately doctored to hide the truth. And Pappoo is not the only one here. Check out ILFS and Deloitte too.