YS Jaganmohan Reddy corruption.

Sunday, 04 May 2014 05:15

"Even Bill Gates' income has not grown by such leaps and bounds," says TDP leader and former finance minister Yanamala Ramakrishnudu. Sources in Hyderabad allege that Jagan and wife Bharathi Reddy's assets-both movable and immovable, held in their own names and those of Jagan's sister Sharmila and her evangelist husband Brother Anil Kumar-amount to a staggering Rs.5,000 crore.

Jagan's wealth increased exponentially once his father became chief minister. The junior Reddy began his business career by bagging contracts worth Rs.25 crore for mini-hydroelectric projects in Karimnagar, Andhra Pradesh, and Shimoga, Karnataka. He also bought 487.20 acres of land at Rs.1 lakh an acre to mine limestone at Thippalur and Nallingapalli in Kadapa district. Jagan's wealth comes mainly from three entities-Sandur Power Co. Ltd which he took over from promoter M.V. Ghorpade in 2001, Bharathi Cement Corporation Ltd (BCCL), Jagati Publications, incorporated in 2006, which rolls out the Telugu daily Sakshi, and Indira TV that owns Sakshi TV. A network of closely held family companies has cross-holdings in Sandur and Jagati.

Ramky Group promoter Ayodhya Rami Reddy, who bought 55,555 Jagati shares, was allotted land for a special economic zone at Visakhapatnam along with various irrigation projects.

Nimmagadda Prasad, founder-promoter of Matrix Laboratories, bought Sandur and Jagati shares. In return, a port company in which he is a partner was allowed to develop three port projects in the state.

Jagan's business strategy, devised by competent financial advisers led by accomplished Chennai-based auditor V. Vijaya Sai Reddy, is to make huge profits by offloading company shares to mobilise funds, which are later invested in new projects. For Sandur Power, Jagan raised Rs.134 crore in 2003-Rs.40.20 crore as equity and Rs.93.80 crore as loans. IDFC gave a loan of Rs.36.80 crore, the State Bank of Mysore Rs.25 crore and Andhra Bank Rs.32 crore.

By the time YSR became chief minister again in 2009; Jagan had spent Rs.107 crore on Sandur. Once it started operations, he decided to make Sandur debt-free and began to look for private investors. He hired the valuation firm S.S. Kantilal Ishwarlal Securities Pvt. Ltd, which valued the company at Rs.370 crore. Jagan then raised Rs.124.60 crore by selling 32.7 per cent of his stake in Sandur to two Mauritius-based corporations-2i Capital PCC and Pluri Emerging Companies PCC. The premium on an Rs.10 share was Rs.61. "I would have earned big money by disinvesting, but I didn't do it," says Jagan. "Those who go in for disinvestment prefer to undervalue. I enhanced the company's equity, even though it meant I would be holding a lesser share." By March 2006, Sandur had repaid all outstanding loans.