MS Shoes East Ltd. is a company established in
Delhi
Delhi, officially the National Capital Territory (NCT) of Delhi, is a city and a union territory of India containing New Delhi, the capital of India. Straddling the Yamuna river, primarily its western or right bank, Delhi shares borders wi ...
,
India
India, officially the Republic of India ( Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the ...
on 17 March 1986
The main object of the company was to take over running business of exports in the name of Shoes East Propriety.
It attracted large investments before collapsing in February 1995.
The
Bombay Stock Exchange
BSE Limited, also known as the Bombay Stock Exchange (BSE), is an Indian stock exchange. It is located on Dalal Street in Mumbai. Established in 1875 by cotton merchant Premchand Roychand, a Jain businessman, it is the oldest stock exchange i ...
closed for three days after the crash.
In 2005, a rehabilitation scheme for the company was devised by the
Board for Industrial and Financial Reconstruction
The Board for Industrial and Financial Reconstruction (BIFR) was a development finance institution under the ownership of Ministry of Finance (India), Ministry of Finance, Government of India, part of the Department of Financial Services of the ...
.
Rise and fall
Pavan Sachdeva took over his father's Delhi-based shoe export business, mostly serving Western Europe, and launched the company as MS Shoes in 1986. He raised money from investors and borrowed large sums from financial institutions and banks.
Sachdeva used intriguing ads created by the Delhi branch of
Rediffusion
Rediffusion was a business that distributed radio and TV signals through wired relay networks. The business gave rise to a number of other companies, including Associated-Rediffusion, later known as Rediffusion London, the first ITV (commerci ...
to attract investors.
During the period 1986–1993, the company won various export awards from the Council of Leather Exports, from Delhi Administration, and from the National Productivity Council.
The company came out with its
first public issue in September, 1992, followed by a rights-cum-public issue of fully convertible debentures in November/December, 1993. In February 1995 the company made another rights-cum-public issue. The issue was to finance its diversification, setting up a twin-hotel project and yarn project, but it was undersubscribed and was subsequently devolved.
Shares were trading at ₹24 in 1993, and peaked at ₹502.5 in January 1995.
The underwriters to the public issue have been held to be liable to the extent of ₹98 crore.
Apparently the share prices had been manipulated.
When MS Shoes crashed in March 1995 the collateral effects were so severe that the Bombay Stock Exchange had to be closed for three days.
More than ₹270 crores were lost.
Investigations and charges
The
Central Bureau of Investigation
The Central Bureau of Investigation (CBI) is the premier investigating agency of India. It operates under the jurisdiction of the Ministry of Personnel, Public Grievances and Pensions. Originally set up to investigate bribery and governme ...
(CBI) started an investigation in 1995.
In June 1997 the CBI sought permission from the government to lay charges against senior officials of the
Securities and Exchange Board of India
The Securities and Exchange Board of India (SEBI) is the regulatory body for securities and commodity market in India under the ownership of Ministry of Finance within the Government of India. It was established on 12 April 1988 as an executive ...
(SEBI) and
SBI Capital Markets, a subsidiary of the
State Bank of India
State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body headquartered in Mumbai, Maharashtra. SBI is the 49th largest bank in the world by total assets and ranked 221st in the '' Fort ...
.
Sachdeva was charged with violating the Companies Act and the Prevention of Corruption Act.
The Central Bureau of Investigation filed a closure report on the MS Shoes case in September 1998, which was accepted by the court.
In 2003, the CBI reopened the case. Several civil and criminal charges were filed.
In April 2003 a Delhi Metropolitan Court issued a non-bailable warrant against Sachdeva for failing to pay back money owed to the Indian Air Force Benevolent Association.
In June 2003 the
Delhi High Court
The High Court of Delhi (IAST: ''dillī uchcha nyāyālaya'') was established on 31 October 1966, through the ''Delhi High Court Act, 1966'', with four judges, Chief Justice K. S. Hegde, Justice I. D. Dua, Justice H. R. Khanna and Justice S. ...
ordered that the company be sent to the
Board for Industrial and Financial Reconstruction
The Board for Industrial and Financial Reconstruction (BIFR) was a development finance institution under the ownership of Ministry of Finance (India), Ministry of Finance, Government of India, part of the Department of Financial Services of the ...
(BIFR). Few companies survive this process. In November 2005, MS Shoes was declared a
sick company by the BIFR, and a plan was drawn up for its rehabilitation.
[Order]
, Board for Industrial and Financial Reconstruction
The Board for Industrial and Financial Reconstruction (BIFR) was a development finance institution under the ownership of Ministry of Finance (India), Ministry of Finance, Government of India, part of the Department of Financial Services of the ...
Diversifications
Before its collapse, the company attempted the bids floated by
Hudco
The Housing and Urban Development Corporation Limited (HUDCO) is a central public sector undertaking under the ownership of Ministry of Housing and Urban Affairs, Government of India in India.
History
This institution came into existence on 25 ...
in July, 1994 for 5 star hotel land and a constructed four star hotel by Hudco comprising 363 rooms, 9 restaurants and 25 shops. The promoter Pavan Sachdeva made a successful bid for the properties. The total bid was ₹177.10 crores for which Hudco issued the allotment letters. When the public issue was devolved, Hudco cancelled the allotments. MS Shoes also attempted to go into the yarn manufacture business.
The land value of ₹177.10 crores has increased more than ten times. MS Shoes has offered to buy the public shares to its existing public shareholders and presently promoters holding is 95%.
Later development
The production and export turnover of MS Shoes increased from ₹25
crores in 1993 to ₹171.93 crores in 1995.
[Order]
, Board for Industrial and Financial Reconstruction
The Board for Industrial and Financial Reconstruction (BIFR) was a development finance institution under the ownership of Ministry of Finance (India), Ministry of Finance, Government of India, part of the Department of Financial Services of the ...
The company came up with public issues which were oversubscribed by more than 50 times. The reasons of sickness was devolvement of public issue and cancellation as well as forfeiture by Hudco of the amount paid of ₹68.68 crores by MS Shoes.
The promoters brought in ₹41.20 crores as on 31.3.2011 and ₹22.08 crores in March, 2014 which have been approved to be converted into equity.
MS Shoes claims that it has won a 5-star hotel project.
References
{{reflist , refs=
[{{cite news
, work=The Indian Express
, title=MS Shoes has gone to the cleaners
, author=Nirmala Ganapathy
, date=6 Jun 2003
]
Shoe companies of India
Indian companies established in 1986
Clothing companies established in 1986
Defunct companies of India
Companies based in Delhi