Son’s biz puts Andhra CM under scanner
Chandrababu Naidu alleges that Reddy Jr leveraged his father’s position to raise money from industrialists in a political favours-for-equity quid pro quo. CR Sukumar reports.india Updated: Apr 21, 2008 02:39 IST
Sakshi, a newspaper launched by Jagan Mohan Reddy, son of Andhra Pradesh Chief Minister YS Rajasekhara Reddy, claims it has become the largest circulated Telugu language paper.
However, it is making news for all the wrong reasons with a rival of Reddy Sr alleging that Reddy Jr leveraged his father’s position to raise money from industrialists in a political favours-for-equity quid pro quo.
Sakshi, or witness, launched on 23 March, claims a circulation of 1.17 million copies. The allegations are being made by Nara Chandrababu Naidu, leader of the Telugu Desam Party and a former chief minister of the state.
Naidu’s party lost to Reddy Sr’s Congress in the 2004 assembly elections. Naidu claims that Jagan Reddy, chairman, Jagati Publications Pvt. Ltd, which owns Sakshi, raised money from business houses such as India Cements, Lanco, Ramky Group, Aurobindo Pharma Ltd, Matrix Laboratories Ltd, Hetero Drugs Ltd, Karvy group, Pioneer Infrastructure and Tanla Solutions Ltd. He says that in return for their investments in Jagati, these businesses have been provided mining leases and government land at throwaway prices.
Most of the business houses involved say that the investments have been made by people close to or related to the promoters in their individual capacity. And Jagan Reddy refutes the allegations made by Naidu, and says investors were attracted to Jagati because of the opportunity it presented. Jagati has a paid-up equity capital base of 81.6 million shares, of which 73.5 million were allotted at Rs 10 a share and the remainder at Rs 350 a share.
Carmel Asia Holdings Pvt. Ltd, owned by Jagan Reddy, was allotted 50 million shares and Gilchrist Investments Pvt. Ltd, owned by Nimmagadda Prasad of Matrix Laboratories Ltd, 23.5 million shares, both at Rs 10 a share.
The remaining shares were allotted to 19 corporate entities at Rs 350 a share. Of these, 833,000 shares were allotted to Gilchrist. The investments were made before the company started operations.
However, Naidu alleges that in return for acquiring shares at a premium, the companies have been showered with favours from the state government, including allocation of hundreds of acres of land across the state for special economic zones and other projects at a nominal cost.
“The chief minister has grossly misused power by favouring these companies in various forms and arm-twisted them into investing in Sakshi,” Naidu says. He adds that India Cements received a limestone mining lease and the Ramky group, 19 acres of prime land near Gachibouli at a nominal cost of Rs 1 crore per acre, while the prevailing market rate is Rs 22 crore per acre.
India Cements has invested Rs 34.02 crore in Jagati, while Eres Projects Pvt. Ltd, part of the Ramky group, has invested Rs 7.77 crore in Sakshi, Naidu says.
In turn, Jagan Reddy asks, “India Cements obtained a benefit of Rs 150 crore in the form of exemption in sales tax during Naidu’s rule. Can anyone believe that India Cements, which is one of the largest cement manufacturers in the country, would invest Rs 34 crore in Sakshi just for limestone leases?”