Home Trade's 'starry' gameplan
The Home Trade story would probably spawn off a new set of studies on celebrity endorsements and the dubious manner in which mega celebrities seem to have been used as cover for a meticulously planned financial scam.
Looking into the rear view mirror, one can only marvel at Home Trade's audacity. By claiming a foreign source of money supply, the company - which was nothing more than a financial dot-com - launched an incredible celebrity endorsement campaign featuring the three of the hottest and most expensive celebrities in the country, to brand a financial product that nobody could figure out.
Internationally, it is a known fact that one complimentary nod from a famous face can launch the most obscure of products - and Home Trade proved it. Nobody knows what Home Trade did or what it sold, or even whether a financial portal could afford to throw around the sort of advertising money that it seemed to do (sources claim that its ad and marketing expenditure was a cool Rs 60 crore).
All they knew was that Home Trade meant a Sachin Tendulkar in full batting flow, or a stunning Hrithik Roshan in a mesmerising dance sequence and the dimpled popularity of Shah Rukh Khan: all seeming to support whatever it was that Home Trade was doing.
The advertisements tailed off with the signature line -Life Means More. If all this was plain gobbledygook, nobody cared - after all these super-celebrities were not asking you to buy anything!
But Home Trade was not throwing all that money for nothing. It knew that celebrity endorsers lend instant credibility to its unknown promoters. They also attract media curiosity, which translates into loads of free publicity. Most importantly, the famous faces create so much brand recall that people stop asking uncomfortable questions.
For instance, did anyone bother with Home Trade's background? Here it is in a nutshell.
The present promoters - Sanjay Agarwal, Ketan Sheth (who was already a broker), Nandkishore Trivedi and one Baluchan Rai (a Hong Kong-based Non-Resident Indian) were the people behind Home Trade.
With funding from Euro Discover Technology Ventures based in Mauritius, this group bought off Lloyds Brokerage Ltd, from its owners - the Guptas - for a paltry Rs 1.50 per share. It later made an offer for sale at several times that sum to get itself listed.
Lloyds Brokerage changed to Euro Asia Securities, which was listed at the Pune and Bangalore stock exchanges, and it started a non-stop effort for listing on the two big Mumbai stock exchanges.
Euro Asia Securities soon switched to another avatar and Home Trade was born. This time, its high profile ensured that nobody delved into its background for over two years - in fact, right until the bubble burst.
As the Home Trade Web site boasts, the celebrity backed brand image attracted the "best in the business" to work with it without asking too many questions.
"For instance, PricewaterhouseCoopers runs its back office operations, an advanced centralised customer contact centre is powered by Siebel, A T Kearney has helped define customer-centric strategies, Andersen Consulting has assisted in focusing on stock broking and risk management, Dow Jones and Reuters deliver up-to-the-minute news, while Multex, CMIE, Dun & Bradstreet et al provide content" (Source: the Home Trade Website).
It also had a line of credit from HDFC Bank right until the time its cheques began to bounce in April this year.
Home Trade proves that celebrity endorsements and the illusion of deep pockets would attract a host of blue chip associations purely on the basis of meaningless claims and clever phrases.
Sample this: Without a single product launched, Home Trade coolly claimed to have become "the world's very first FMFG (Fast Moving Financial Goods) Company".
Look at the claim on its Web site. "You've seen the ads splashed across media. You've heard Shah Rukh, Hrithik and Sachin. Exciting and innovative things are set to happen in the investment bazaar, as these revolutionary new FMFG products herald the next generation of financial services available to consumers. Productised and packaged, available 'off the shelf' at convenient locations across the country, these services are driven by a simple philosophy - 'life means more'. Add to this the firm belief that finance can be fun, and you've got the secret to what makes them special. Designed to address specific needs across a wide spectrum, these boxed products are backed by state-of-the-art infrastructure and the latest CRM technologies. And of course, the financial expertise and strong credentials of Home Trade."
'Productised', 'boxed products'- what on earth does it mean in the absence of a specific service? Home Trade's executives spoke setting up 150 outlets in 15 cities (in a magazine interview), which would allow people to trade across multiple platforms, but in fact its Internet trading platform also never took off right until its recent suspension.
But it did not matter. Home Trade was not focused on earning revenues through product sales. It seemed focused entirely on continuously raising capital - in fact, the failed dot-com model.
Its ultimate aim was to tap retail investors through all that hype. Having ensured that its share price was kept at a high at the Bangalore Stock Exchange, it was lobbying to have its shares listed on the Bombay Stock Exchange and the National Stock Exchange. It had almost muscled its way into a BSE listing when its money began to run out sometime in April this year.
That is when the music finally stopped for Home Trade. What it was doing was to use its hyped up image to cover up its continuous borrowings and the illegal government securities trading through an equity broking membership. It was running a sort of Ponzi scheme with several co-operative banks.
By pretending to buy G-Secs and sending them for physical transfer, it used the money for a couple of months and then repeated the deal with another co-operative bank to repay the first.
Finally, things reached a standstill and it could no longer repay over Rs 125 crore to the Nagpur Co-operative Bank. Pretty soon it was clear that the Osmanabad Central Co-operative Bank, the Wardha Co-operative Bank and a couple of others from Pune and Ahmedabad too would face the same trouble. Now that the music has stopped, the hole in the co-operative banks' books could go up to as much as Rs 500 crore.
Securities industry sources say that some co-operative banks' authorities, in all probability, had actively colluded with some Home Trade executives in its shady game.
Today everybody is rushing off to file complaints against Home Trade. Not just the banks, but even auditors such as PricewaterhouseCoopers, which was happy to allow Home Trade's Web site claim that it ran its back office transactions, have filed a winding up petition against it.
Newspaper reports say that the celebrity trio, which lent Home Trade its credibility, have also not been paid their entire dues - nor has its advertising agency and its public relations company. Clearly, the sizzle and flash of the media hype has finally ended with unseemly little plop.