Lobbyists seem to be the flavour of the month. Rajesh Sharma, though, was not just another run-of-the-mill lobbyist. He was better educated, and also more resourceful with his know how on the country's debt market functions.
HT spoke to three individuals — one real estate developer, one real estate consultant and a banker — to figure out Sharma's modus operandi.
After all, several domestic players and even bigger international players offer services similar to Sharma's Money Matters. So what made him so special? And so successful?
Every bank has a sectorial limit on secured loans it can disburse. And there is always more demand for those, especially among real estate developers.
"Here is where Sharma came in," said a Mumbai-based real estate developer who hastened to claim that he had never availed of Sharma's services. "Banks have their own set of rules on which project they should invest in, which corporates are eligible (depending on the criteria) and the amount and interest rates of loan," he said.
Sharma allegedly not only bargained on behalf of his real estate clients but also "helped" them with balance sheets.
"See if you do not have proper cash flows, proper rate of return then banks most likely will reject your loan in normal circumstances," the developer said. "Sharma along with the company's CFO would work this out. There was a time when we paid interest rates over 15% and still the bankers were not willing to lend. What do you expect us to do?"
After the first step Sharma would, like any other middleman, approach the banks. "Over the years he had developed an expertise in debt-raising, and contacts in banking sector," said the head of an American real estate consultancy based out of India. "These banks would then go ahead with the loan with a little relaxation in the evaluation rules," he added.
But his task did not end with that. "During the downturn in India, developers were not able to get loans at all due to strict guidelines. And Sharma with his contacts would be the only way out," said a senior executive in a private sector bank. He said private sector banks have better checks and balances.
"Not all developers have access to banks," said the real estate consultant. "And even if they do, they may not have the technical know-how as corporate loans are really tricky."
"This is just the tip of an iceberg. There are many Sharmas in the system but due to its unstructured DNA, real estate developers and some infrastructure players, were amongst the clients," said the real estate developer.