Jai Corp shares: ED attaches Alibaug land parcels worth Rs 336 crore; here's why

Jai Corp Ltd shares were trading cautiously in Wednesday’s trade after the Mumbai branch of the Directorate of Enforcement (ED) provisionally attached 88.47 acres of land parcels in Alibaug worth Rs 336 crore under the Prevention of Money Laundering Act (PMLA), 2002.

On Wednesday, the Jai Corp stock was quoting 0.19 per cent higher at Rs 90.34 apiece. The scrip is down 37 per cent in the past one year.

ED noted that Jai Corp had launched an Urban Infrastructure Venture Capital Fund (UIVCF) in 2006-07 and collected Rs 2,434 crore from investors, including public sector banks and other public sector financial institutions. The fund invested the money in several special purpose vehicles (SPVs) for real estate projects across India.

According to the ED, the fund’s term was illegally extended beyond the permissible limit without SEBI approval. SEBI subsequently wound up the fund and directed that investors be given an exit based on valuations of the fund’s SPV investments by an independent valuer.

ED alleged that the fund’s stake in the SPVs was fraudulently valued at Rs 269.20 crore, significantly below its fair value, in connivance with the UIVCF management. This resulted in investors receiving an exit at a significantly lower value, the agency said. It further alleged that residual units of the fund were acquired at a much lower value by five entities linked to Jai Corp’s promoters.

"ED investigation revealed that the fair value of funds share in SPVs was fraudulently valued at undervalued price of Rs  269.20 Crore in connivance with the management of the UIVCF. Based on this, the investors were given exit from the fund at significantly undervalued amount. Investigation has further revealed that residual units of funds were acquired at a much lower value by 5 entities related to the promoters of the Jai Corp Limited," it said.

One of the SPVs was Neelkanth Township and Constructions Private Limited, in which UIVCF had invested Rs 51 crore. The investment was used to acquire a land parcel in Alibaug. The ED said its investigation found that the fair market value of the fund’s stake in the SPV was significantly suppressed and the stake was acquired at an undervalued price by the five entities.

According to the ED, the transactions generated proceeds of crime worth Rs 230 crore. It subsequently issued a provisional attachment order covering immovable properties of the SPV worth Rs 230 crore as of October 31, 2022. The properties have a present market value of Rs 336 crore, the agency said.