NEW DELHI, March 30: SEBI's attempt to regulate plantation companies has set alarm bells ringing among 110 plantation firms across the country. These firms have come under the banner of Association of Agri Plantation Companies of India (AAPCI), which was formed this month. The association has sought time to adhere to the SEBI directive which requires plantation companies to go in for credit rating.While AAPCI has welcomed the move for mandatory rating, the association's grouse stems from the non-availability of a sufficient time-frame. AAPCI, in its memorandum to SEBI chairman DR Mehta, has urged an early discussion on various aspects involving plantation companies. "We are yet to hear from SEBI and it seems the market watchdog is not paying heed to an industry with an investor base of 1.2 crore and 25 lakh employees," says AAPCI president Brigadier SC Gupta.
"SEBI is prejudiced as it is hell-bent on killing fly-by-night operators but it is also affecting companies which are not there to dupe investors,"said another member of the association. The association has also sent a copy of the memorandum to the Dave Committee, which is looking into the operations of agro companies, finance minister Yashwant Sinha, and finance secretary and minister of forests and environment Suresh Prabhu.
According to a senior official with AAPCI, SEBI's move to curb fresh collections is likely to have an adverse impact on the plantation business, given its perishable nature. "The firms require investments on a regular basis to sustain huge tracts of plantations, hybrid farming and purchase new tracts of land," an association member said. According to the member, plantation firms need at least six months to complete documentation and paper work, including balance sheets in order to apply for credit rating and getting it. "In the process, the genuine firms and their employees will suffer as they have no alternative sources of finance although some firms may mobilise money from the banks in their individual capacity," headded.
Industry sources say that the SEBI directive has given an opportunity to fly-by-night operators to take advantage of the order on credit rating and wind-up. This may create panic among investors and force them to liquidate deposits even with genuine companies. "What we desire is a set of regulations and basic parameters from SEBI for getting a credit rating," Gupta pointed out. Currently, SEBI has empowered four credit rating agencies to rate plantation schemes - Crisil, Icra, CARE and Duff & Phelps. However, AAPCI members are unhappy over the stance taken by credit-rating agencies and their lack of coordination with SEBI. To start with, credit-rating agencies do not have technical personnel to evaluate plantation schemes.
"Unlike an NBFC, you cannot rate a plantation company on the basis of mere assets and liabilities and balance sheets. You need people trained in the field of agriculture to assess the strength of a scheme," elaborated Gupta.
The agencies are also charging a fixed sum for therating, which the association terms exorbitant. "They are not charging on the basis of the turnover of the company but ask for a fixed sum, say Rs 3 lakh per company or Rs 1 lakh per scheme. Companies with a turnover of Rs 1-2 crore cannot afford to fork out such huge sums. If these ratings come under review in six-months to one year, substantial money will flow out," the association member added.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
