Realty check

Chronicling Shahid Balwa's astounding rise to one of the richest men in the country

DB Group managing director Shahid Usman Balwa came into the limelight when Forbes magazine named him in its November 2009 issue, as the 50th richest man in India, estimating his net worth at $ 1.2 billion.

Ever since, his net worth has continued to be a topic of constant discussion by the financial community, and with good reason. "Even the CBI will find it difficult to calculate his personal net worth accurately at this point.



If you remember the case of Ramalinga Raju, you would have noticed how difficult it is to do so immediately.

The CBI will get its answer only after toiling for six months, that too with active support from forensic accountants.

At this juncture, we do not know how many unlisted front companies he has, how many such front companies are incorporated in tax havens such as Isle of Man or Mauritius, whether he has pledged his shares for any loan, or made unaccounted money through insider trading," a prominent financial analyst told MiD DAY, requesting anonymity.

Going strictly by Shahid Balwa's personal shareholding in DB Realty Ltd, it would seem that he holds only a paltry 74,340 shares, which comes to merely 0.03 per cent of locked-in shares. But nothing could he more misleading, because hardly anything is known about his stakes in unlisted subsidiary companies.

However, going by the figures indicated by the shareholding pattern, analysts have estimated his personal wealth to be a little more than Rs 1,978 crore, after his company's share price crashed due to his arrest.
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"His net worth must have been Rs 2,423 crore before the stock price crashed, which means he lost around Rs 450 crore," a financial analyst said.

But clearly, it's much more complicated than that. Balwa has a fleet of four odd aircrafts ufffd two business jets and two choppers which he rents out through an air charter company called Eon Air Pvt Ltd when he does not use them for personal trips.

A look at the balance sheets and annual reports of DB Group and its subsidiary companies show unsecured loans borrowed by a subsidiary from another.
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"We must keep in mind how Kusegaon Realty Ltd loaned the Morani brothers owned Cineyug Films Pvt Ltd, the money which was allegedly passed on to Kalaignar TV, owned by Tamil Nadu CM Karunanidhi's family members. We can expect several such deals channelised and hidden through a maze of companies, both in India and in tax havens abroad.

We must also expect several crossholdings between unlisted front companies as well as other entities, which will be extremely hard to unravel easily. If we consider how easily money can be hidden in land holdings, the task becomes all the more difficult," the analyst observed.

It is easier to understand the complexity of the task if merely one factor is taken into account - the number of companies over which Shahid Balwa and the promoter group exercises influence. The DB Group's draft red herring prospectus itself declares that at least 62 subsidiary and group companies!

"Some subsidiary companies' documents say that Shahid, his promoter group and relatives control other companies and entities. Of course, we have not taken into account investments made by companies as well as individuals.

Nor have we attempted to find out how much money has been siphoned off and salted away abroad.

But if we take all these factors into account and also the fact that the real estate sector itself is notorious for its lack of transparency, then we may be looking at merely the tip of the proverbial iceberg," the analyst concluded.

Other analysts who spoke to MiD DAY also said that as Morani brothers' stake holdings in DB Realty as well as other stake holding companies with interesting names such as Bollywood Mauritius Holdings and Walkinson Investments come under scrutiny, there are much more that will come to light.

"The Mauritius factor has complicated things further. It is possible for any dubious firm to channel money to Mauritius through the hawala route or round tripping it across several tax havens.

Such players are known to purchase what are known as participatory notes or P-Notes, which enable them to play the Indian stock markets from Mauritius, without revealing even their identities.
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The Indian government allows such dubious investments and this policy has now come back to haunt them.
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When CBI pursues the money trail, it should be least surprising when it runs into a smokescreen of difficult to track identities of such players as well as the opaque rules of tax havens where such money is usually parked," revealed another prominent analyst. --Bobby Anthony

Never say die

It is never say die for Hamid Khan, the Right To Information activist from Mumbai Central who will not rest till the guilty are punished. Hamid's target is the Balwa clan, including Shahid and their business partners, who fraudulently grabbed a 13, 800 sq mts prime plot in Mumbai Central.

The complaint says that Shahid Balwa's company; DB Realty is allegedly illegally constructing high-rise residential towers using forged documents and arm-twisting tactics. When the discrepancies came to light in 2009, Hamid approached the Nagpada police station to report the matter.

They did not entertain him, saying it was a civil matter.u00a0u00a0 Hamid approached the Mazagaon court with his grievance and relevant documentation. Taking cognizance of the complaint, the court directed the police to register an FIR.

According to documents available with MiD DAY, on October 1, 2009, the Nagpada police finally registered an FIR under Sections 406, 420, 468, 504, 506 and 120 (B) of the IPC against Shahid Balwa, his father Usman Balwa, Isak Balwa, Salim Balwa, Abdulla Patel, Adil Patel, Nabil Patel (the trio are sons of don Yusuf Patel and also stake holders in his businesses) and 12 others.

Hamid recalled two stark incidents that unnerved him which involved Shahid. The RTI activist recalled that one day when he bumped into Shahid, he allegedly said mockingly, "Mein police, politicians aur judiciary ko apni jooti ke barabar samjhata hoon (I consider the police, politicians and judiciary no better than my shoes)."
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When Hamid did not flinch, theu00a0 disgraced DB Group manager said that he would not give him even an inch of land, he could do whatever he wanted.

Now says a disappointed Hamid, "17 months have passed, but the Nagpada police has not even recorded my statement. Will Shahid Balwa be arrested?" asks Hamid. Sanjay Kadam, senior police inspector, Nagpada said that the enquiry is underway. "The case investigation papers will soon be submitted in court," said Kadam.

Hamid has also registered a case in the Anti-Corruption Bureau (ACB) against Balwa, Charity Commissioner, Wakf Board, MBR and R Board, MHADA, BMC, UDD Housing department and the NPCB. -- Inputs by Sayed Roshanu00a0and Akela

Tower trouble

A high-rise residential tower project by Neelkamal Realtors and Erector Pvt Ltd in Mumbai Central is mired in controversy.

The prime plot, measuring around 13,837.06 sq mts has the Orchid City Centre Mall and the Orchid Enclave building which is being constructed, actually belongs to the Wakf Board, documents procured through the Right to Information (RTI) have revealed.

Currently, as per the plan three multi-storey towers consisting flats worth hundreds of crores of rupees and a three-storey shopping mall worth around Rs 300 crore are standing on Wakf property of Haji Zakariya Ahmed Patel Mohammadan Orphanage and Asylum Trust in Mumbai Central.

According to Hamid Khan, the RTI activist who sought information on the project after the Wakf Board was intimated about the illegal construction, officials sent a letter to the MGCM regarding the same. Despite two orders to immediately stop all construction work on the towers, a visit by MiD DAY revealed that work was in progress.

According to government regulations, only religious activities such as a mosque or a madrassa or educational institutions such as a university or school can be built on a Wakf land.u00a0

When contacted, Wakf assistant chief executive officer Aziz Ahmed said that the construction being carried out is entirely illegal. "We approached the authorities regarding the same. Despite repeated orders, the construction is still on," said Aziz.

He said that the company had approached the Bombay High Court.

He added that under Section 40 of Wakf Act 1995, even the government or court could not decide. The authority lies solely with the Wakf board. -- Sayed Roshan

Intelligence Eye

The Intelligence Bureau (IB) has been keeping a clandestine check on Shahid Balwa's companies and business interests for the past three years.

Alarmed by his rapid rise, the agency has been keeping tabs on his activities. According to intelligence officials, a team of experts is probing Shahid Balwa's role in manipulating stocks, characterised by his 'hand pump'(create an artificial scarcity of shares) operations.

The IB investigation report, now with this newspaper, reveals the modus operandi of a group of high-profile stock brokers who, through their front companies were active in various stocks. The dealings are to the tune of a few hundred crore.

The modus operandi of the cartel was to push the share prices of these companies to a new high and then unload the shares. The agency is probing Shahid Balwa's dealing in the stock exchange.

In Custody

Shahid Balwa has been extremely well mannered and soft-spoken, say CBI officials, which may be quite surprising because this Bandra (W) resident is actually known to be aggressive and has an attitude bordering on arrogance. Sources say he is keeping his cool with investigators.

He gets home cooked food everyday while in custody. Officials add he does not eat too much as he is quite careful about both quantity and quality -- what and how much he eats.

Insiders confirm what has been reported earlier, that he is a fitness freak and works out regularly.u00a0CBI officials interrogate him almost all through the day, with the sessions wrapping up at around 8 pm.

It's business asu00a0usual, says DB

The familiar catchline goes: Whenever you think of colour, think of us. Put a twist into that and say, whenever you think of realty, think of DB, and you would not be stretching things.

DB Realty is one of the most prominent names in Mumbai's real estate industry and one could safely conclude that it ranks amongst the top three in the industry.
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The company has a plethora of projects from Mumbai Central (the area where Shahid Balwa grew up) to others spanning South Mumbai and Western Suburbs.

Some major ongoing projects include those at the Mahalaxmi Race Course and in Mira Road, Mankhurd, Mumbai Central, Byculla, Jacob Circle, Goregaon, Dahisar, Malad, Kandivali, Prabhadevi and Andheri. DB also has major projects in Pune, home turf and bastion of Maratha strongman, Sharad Pawar.

With the arrest of Shahid Balwa, DB Realty suffered a major setback share prices tumbled, coming down by 20 per cent on the first day of the arrest itself.u00a0 DB's share price plunged to Rs 109 on February 9 from Rs 136 on February 8, the night when he was arrested.

A real estate broker

said about flat prices, "Flat prices are primarily dependent on the location and secondly on the builder's reputation. With Shahid Balwa's name embroiled in the 2G scam, there is a lot of uncertainty in the real estate market."
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DB went into damage control mode immediately after the arrest of Shahid Balwa. It issued a statement to quell fears amongst customers and stakeholders.

The statement read: 'Shahid Balwa, the Managing Director of DB Realty Limited has been wrongly implicated in the investigations pertaining to the grant of 2G licenses and has been arrested by the CBI in that context.
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We reiterate that neither Balwa nor any person forming part of the DB Group has done anything inappropriate or illegal. Balwa will be strongly contesting the proceedings. He has immense faith in our judiciary and judicial system and is confident that ultimately the truth will prevail and Balwa will stand vindicated.

'We would also like to state that these developments wouldn't affect the functioning of DB Realty Limited in any manner whatsoever. DB Realty Limited will continue its business in the normal course under Managing Director, Vinod Goenka along with the top tier team under the guidance of its Board.

We assure all our stakeholders that their interest in the Company will be protected. DB Realty is a strongly capitalized company with a net worth of Rs 3,210 crore as of December 31, 2010. DB Realty Limited has sufficient resources to continue with all its projects under construction." -- Varun Singh

Rs 3,210 cr
This was DB Realty's worth as of December 31, 2010.

Flyingu00a0High
These are representational pictures of similar aircraft owned by Shahid Balwa.

A Bombardier Global Express which falls into the heavy jet category. It has 14 seats.
BD-700-1A10

A Bombardier Challenger 604 that falls into the heavy jet category. It has 9 seats.
CL-604

A Eurocopter Colibri helicopter with 5 seats
EC-120-B

A Sikorsky helicopter with 6 seats
SK-76C