It's a bizarre coincidence.
The Money Matters Financial Services'headquarters in Marine Lines, Mumbai, was earlier one of the back offices of UTI, another financial institution that was rocked by a similar financial scam in 2001.
The company, which finds itself at the centre of the real estate scam, as alleged by the Central Bureau of Investigation, is housed in a dilapidated building, and from the exterior, nobody can ever guess that the fourth floor of MMFSL would be so swanky.
But the rise of MMFSL, until recently a small time NBFC-cum-debt market services company, has been like a phoenix. MMFSL specialises as a 'client-centric debt placement firm that has placed around $9.5 billion of debt in the past two years' for clients as big and diverse as Reliance Petroleum, Jaypee Group, Tata Motors Finance, Indiabulls, JSW and Suzlon.
Even though debt placement and debt syndication are its predominant line of business, it also offers private equity and mergers & acquisition advisory, broking and financial turnaround advisory.
But as debt market players will tell you, one went to MMFSL to mainly get loans approved from LIC and its arms and a select few state-owned banks.
A look at some of the recent debt syndications by MMFSL will clearly point their effective strike rates in debt syndication: Rs 188 crore (Rs 1.88 billion) for DB Realty, Rs 3,327 crore (Rs 33.27 billion) for Suzlon in just three months between January and March of 2010, Rs 7,350 crore (Rs 73.5 billion) for Jaypee Group from July 2009 to January 2010, and Rs 1,000 crore (Rs 10 billion) for Reliance Capital in January 2010.
In June, IL&FS Milestone Fund picked up a 74 per cent stake in HCC Park, a 1.8-million square feet commercial property at Vikhroli in Mumbai, for around Rs 575 crore (Rs 5.75 billion).
Interestingly, MMFSL was the sole advisor to the deal. HCC group company Lavasa has been named by CBI in its first information report.
Naturally, as business grew, so did the company's revenues. MMFSL ended last financial year with revenues of Rs 227 crore (Rs 2.27 billion) and a profit after tax of Rs 125 crore (Rs 1.25 billion).
This
year, it's even better. In the June quarter, revenues stood at Rs 64 crore (Rs 640 million) while PAT was Rs 39 crore (Rs 390 million).
MMFSL's shares, languishing at Rs 7 in late 2007 and at Rs 50 in April of 2009, zoomed to Rs 787 in the last week of October, just ahead of its much talked about qualified institutional placement.
Yesterday, the shares were trading at Rs 663.90 crore (Rs 6.63 billion) before crashing 20 per cent today.
MMFSL's QIP in October created a buzz in the market.
At a time when bigger NBFCs and debt market brokers were struggling to grow their businesses, MMFSL -- with its boutique operations -- raised Rs 445 crore (Rs 4.45 billion) from blue chip investors at Rs 625.25 a share.
The money raised was to supposedly grow its asset financing business like short-term corporate funding, structured product financing, margin funding and acquisition funding to corporates.
With 60 per cent of the placement cherry-picked by pedigree investors like Morgan Stanley, Fidelity, GMO, and Wellington, the lead manager IIFL even came up with advertisements after the huge success.
The company's board is packed with independent directors such as R N Bharadwaj, ex-chairman of LIC, V P Singh, ex-chairman of IFCI, and B Samal, ex-chairman of Allahabad Bank.
Rajesh Sharma, a chartered accountant with 17 years of experience, is the chairman and managing director of MMFSL.
He has been arrested by CBI, which alleges that Sharma bribed senior officials in LIC, LIC Housing Finance and other state-owned banks like Central Bank and PNB to get loan applications of his clients passed quickly and even in some cases, without proper diligence.