The curious case of Pawan Sachdeva: Shoe magnate and a run-in with Gautam Adani
₹200 crore company. Then the man, who like many other successful businessmen of the early 1990s loved flashy foreign cars, turned too cute, or too crafty, depending on which way you look at it. MS Shoes East launched its first public issue in September 1992, followed by a rights-cum-public issue of fully convertible debentures in December 1993.
The company’s shares skyrocketed from ₹24 apiece in 1993 to ₹502 by January 1995. Encouraged by these successes and buoyant markets, MS Shoes launched another public issue in 1995 for fully convertible debentures (FCDs) to finance a twin-hotel project. The public issue duly closed after being over-subscribed.
However, the Securities and Exchange Board of India (Sebi) later found irregularities in the issue and directed MS Shoes to offer subscribers the option to retain or withdraw their offers. Several subscribers withdrew, and the issue was undersubscribed. Sebi had found the company guilty of misleading investors by failing to disclose crucial information in its advertisements and public notices, particularly about the cum-rights nature of the issue.
This led investors to believe they were buying shares at a discounted price, causing a surge in demand. Most didn’t realize that post the rights, the price would fall steeply. Later, the Central Bureau of Investigation (CBI) charged Sachdeva with entering into a criminal conspiracy with Sebi officials and merchant bankers to allow a 90-day gap between the company’s public issue and the rights issue.
According to the CBI, this would have enabled Sachdeva to divert funds raised from the public issue to subscribe to the promoters' rights entitlement. Sebi rules did not allow for a gap of more than 30 days between such issues. Sachdeva
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