Sebi advises against 4 plantation firms

The Securities and Exchange Board of India today advised investors not to put their money in four collective investment schemes that were rated as highly speculative. “Investors should not invest any funds in Swaranbhoomi Forests (India) Limited Rose Valley Resorts and Plantations Limited Timber World Resorts and Plantations India Limited and Hariyali Plantations (India) Limited unless they can afford to take the risk of losing their investments,” Sebi said in a release. The rating assigned to all four schemes indicates high uncertainty that it would provide the assured returns in the form of produce or cash. “Risk factors for the schemes are extremely high leading to high expectation of default on obligation,” Sebi said. Sebi has also prohibited any other schemes, apart from these four, from mobilising deposits. Some other companies are in the process of obtaining ratings for their schemes and the regulator would periodically notify the names of these companies, as and when they obtain a rating. Sebihad earlier directed all collective investment schemes to obtain a rating from the four credit rating agencies Crisil, Icra, Care and Duff and Phelps. Meanwhile, some plantation companies have found a way to continue to take investors for a ride on the plea that as they have been asked not to raise any further funds till they get a credit rating. Complaints regarding the misinterpretation of the Sebi diktat are being received by the market regulator. Sebi officials pointed out that some plantation companies have written to investors stating their inability to refund the money owing to the Sebi diktat and are therefore diverting the funds to another scheme. These letters have been received only by a few investors but the decision to route the funds to other schemes is being taken with regard to all investors. The reason cited is that the investors did not respond to the letter. In short, instead of getting refunds as desired by the investor, the money is ploughed into other schemes. Sebi has beenreceiving a number of complaints against small-time plantation companies which have refused to pay back the money even after the maturity period is over. They have cited Sebi’s recent compulsory credit rating directive as the major reason since it does not allow them to conduct their regular business activities. A few plantation companies have also gone to the extent of issuing public notices regarding their inability to redeem their deposit amounts. Sebi has however clarified that while all fresh funds could be raised following credit rating the existing business can be carried out as usual.