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Oswals crash land on alleged fraud in Oz

© Neena Bhandari, Business Standard, India

When industrialist Pankaj Oswal set out to build one of the largest fertiliser plants in the resource rich state of Western Australia, his stellar rise attracted admiration and envy, but today he stands accused of one of biggest corporate frauds in Australia after his Burrup Fertilisers Pty Ltd, a subsidiary of Burrup Holdings, went into receivership last December.

The ANZ Bank, which is trying to recover A$900m in loans, appointed PPB Advisory as the Receivers following ongoing court disputes between Pankaj, who was Burrup's chairman and managing director, and Norway's Yara International, a 35 per cent shareholder and customer of the ammonia plant; default events related to debt facilities which were established between 2002 and 2007; and evidence of financial irregularities.

Born with a silver spoon in his mouth, the grandson of one of the great Ludhiana textile magnates and son of Abhey Oswal, he established Burrup Fertilisers Pty Ltd in 2006. The young chemical engineer didn’t take the money from his father, but borrowed from “rich friends” and took loan from banks when he set out in 2000 to set up plant on the rock-strewn Burrup Peninsula in Western Australia.

Burrup Fertilisers Pty Ltd (BFPL) is a private company, formed in Australia in 2000 and backed by the Oswal Group in India. Yara International ASA owns 35 percent of Burrup and is the exclusive marketer of ammonia from the plant. Construction of the company's AUD 700 million liquid ammonia plant on the Burrup Peninsula, near Karratha in western Australia, began in 2003. Production started in April 2006, and BFPL's first export shipment was made from the Port of Dampier in June 2006.

Documents filed in the Federal Court in Perth by receivers PPB Advisory in October 2011 allege the former directors transferred more than double the amount of money previously estimated i.e. A$ 210 million from their 65 per cent-owned Burrup Fertilisers to their privately owned overseas companies.

In the first Court documents filed in March 2011, PPB Advisory claimed that the Oswals were required to re-pay A$95 million. They allege Mr Oswal siphoned money out of the company to pay for the couple’s extravagant lifestyle, including luxury cars, a Fairline cabin cruiser, a Gulfstream jet, credit card debts and construction of a home in Western Australia's Peppermint Grove.

The new statement of claim filed in early October this year repeats earlier allegations that Mr Oswal made payments with company funds toward construction of the family's $70m mansion in Perth's, luxury cars, a boat and a corporate jet. But now, PPB alleges that Mr Oswal transferred $51.7m of Burrup Fertilisers funds to a number of Singapore shelf companies "for no consideration and/or benefit". The amended statement of claim filed by PPB also alleges that a number of other companies issued "inflated invoices" for goods or services that were to be provided to Burrup Fertilisers. The alleged overpayments totalled $61m.

The Federal Court documents list more than 50 transactions made during 2009 and last year. For example, in the case of Oswal Projects, the real value of the work performed was A$462,000, but the actual amount paid was A$7.4m, according to the Federal Court document.

PPB also alleges the Oswals breached their duties under the Corporations Act. Mr Oswal has previously said he was entitled to transfer money to his private companies in exchange for his guaranteeing cost overruns during the construction of the plant. In a statement, he said, ''It is a smokescreen to take the spotlight off PPB's disastrous handling of the gas sales agreement which has destroyed shareholder value and opened up PPB and its lawyers to massive damages claims”.

A report by accounting firm BDO, commissioned by the Oswals law firm, found that PPB Advisory serving as the receiver for Burrup Fertilisers, charged $5.1 million in fees while spending $50,000 on iPads, $51,000 on entertainment at AFL matches and hundreds of thousands spent on travel and accommodation in only five months, according to an article by Andrew Burrell in The Australian.

In September, Radhika lodged a writ in the Victorian Supreme Court against ANZ’s claim that her husband had forged documents used to guarantee A$1.2 billion in funding from ANZ. The Oswals are contesting the right of lender ANZ Bank to appoint receivers to Burrup Fertilisers. The couple lost the appeal to put the bank's court action on hold while it contested the validity of the appointment of PPB Advisory.

The Oswals, Pankaj and his wife Radhika, relocated to Dubai from Perth, which has been their home for the past 10 years, after their 65 per cent shareholding in Burrup Holdings was placed in receivership. The Oswals, who have consistently refuted any wrongdoing, have said they look forward to the sale of Burrup Fertilisers which is still a profitable plant. The $1 billion plant produces 759,000T per year. 

Mr Oswal, who is seeking a Federal Court inquiry into whether the receivers breached their duties by disclosing confidential documents to potential buyers, is convinced that Yara and the ANZ bank are in collusion in an attempt to force him to sell at an unacceptably low price.

Esben Tuman, Vice President Corporate Communications, Yara International ASA, told Business Standard, “We are comfortable with our rights related to our ownership in Burrup Holdings. The legal proceedings related to the remaining 65 per cent share in Burrup Holdings are multiple and complicated, and there is a risk that these will remain unresolved for some time, unless a settlement is reached. The sales process is run by the bank and the receivers. We are awaiting the outcome of the process, and we are interested in buying the stake, given the right valuation”.

Yara International ASA is the number one global supplier of mineral fertilizers and agronomic solutions

The Receivers still expect the sale process to be concluded before the year end. “We have received over 20 expressions of interest and have narrowed it down to a small group of potential buyers,” a spokesperson for PPB Advisory told Business Standard.

Yara has also contested the legality of the Oswals' rejecting the Technical Ammonia Nitrates (TAN) project. Burrup Nitrates’, a joint venture between Burrup Holdings and Yara International, proposed TAN plant adjacent to Burrup’s current facility. "Conduct of this nature would breach the Oswals' duties to act in the best interests of BHL. The Oswals also seem to ignore that BHL has entered into binding commitments with Yara and Yara retains important intellectual property rights needed for the TAN Project," a company statement said.

Technical Ammonia Nitrate is the main raw material in the production of civil explosives and is widely used by the mining industry. The proposed project is ideally located to serve growing demands for TAN in the Pilbara region.

The Oswals have confirmed they would not support the TAN plant, which could impact on the A$20 billion worth of mining developments in the region. Yara International, has pushed for the project because it would own 65 per cent of the related company, Burrup Nitrate.

The Oswals, who refused Business Standard’s interview request, have come under the spotlight not only for their business dealings but also for their lavish cocktail parties and the A$70 million mansion nicknamed `Taj-on- the Swan’ in the swanky Peppermint Grove suburb of Perth.

It appears income linked to the transfer of the stake into Ms Oswal's name resulted in the ATO issuing a $71 million income tax bill for 2007. The debt rose by several million dollars in subsequent years with more than $60 million in penalty fees sending the amount to $186 million by August this year, reports the Australian Financial Review.

Radhika, who owns the fast food vegetarian restaurants, Otarian, In London and New York, had told The Western Australian last year that “I think the fact we are not Australians troubles people. What I really liked about Australia was the fact that it was multicultural when I came here, I'm a bit disappointed”.

A spokesperson for the Australian Securities & Investments Commission, which was alerted to the case eight months ago, told Business Standard, “I can confirm we are currently working with the receiver, PPB, and are in the process of assessing information provided”.

At a time when Indian mining and IT companies are looking at investing in Australia in a big way, the Oswal’s dramatic fall will make some uneasy.

  © Copyright Neena Bhandari. All rights reserved. Republication, copying or using information from any www.india-voice.comcontent is expressly prohibited without the permission of the writer and the news agency through which the article is syndicated.











Apache to buy Oswals' stake in Burrup Fertilisers

© Neena Bhandari, Business Standard, India

US oil and gas company Apache Corporation on Monday announced that it will acquire 65 per cent stake in Burrup Holdings Limited, parent company of Burrup Fertilisers Pvt Ltd (BFPL), one of the world’s largest liquid ammonia plant in Western Australia built by industrialist Pankaj Oswal.


Oswal owned 30 per cent of the shares in Burrup Holdings Limited and Radhika Oswal owned 35 per cent shares. The stake was put up for sale by receivers for the Australia and New Zealand (ANZ) Bank, which is trying to recover A$900m in loans.


An ANZ spokesman told Business Standard, “We continue to believe that there are reasonable grounds for a full recovery of our exposure to the Oswals.”Apache has, however, not revealed the price it intends to pay, but earlier media reports estimate the deal is worth around A$600mn, well below an offer of A$800mn made by Wesfarmers last year.


Norway’s Yara Inter-national ASA, which is a 35 per cent shareholder and customer of the ammonia plant, has until January 31, 2012, to match the offer.


Yara’s vice-president, Corporate Communications, Esben Tuman, told Business Standard, “As a major shareholder Yara is clearly an interested party in the sale process and has certain pre-emptive rights under the BHL Shareholders Agreement. Yara also enjoys rights to pursue a TAN Project with Burrup Holdings. We are comfortable with our situation, and we will review our position in the time to come”.


Apache, which plans to proceed with the development of a technical ammonium nitrate (TAN) plant in the ‘Burrup Peninsula’ of Western Australia, said it was negotiating to sell most of its interest in the TAN project to Orica, an Australia-based global supplier of mining explosives.


Apache has supplied natural gas to Burrup Fertilisers since the plant commenced production in 2006. With a production capacity of 760,000 metric tonnes annually, the Burrup Fertilisers plant produces 6 per cent of the total world output of tradable ammonia.


Apache's chairman and chief executive officer, G Steven Farris said in a statement, “After a year of significant turmoil surrounding the Burrup plant ownership, Apache decided to make this investment in order to stabilise the project and secure a long-term economically viable market for our natural gas production in Western Australia.


BFPL has a 25-year take-or-pay contract for gas with Apache Energy Ltd, Tap Oil Ltd and Kufpec Australia Pvt Ltd. Oswal had sealed a deal with Apache to provide him with huge quantities of natural gas at what is now a bargain price.


Last week, the Victorian Supreme Court refused an application from Radhika Oswal to block the sale of her 35 per cent share in the company. A spokesman for the Oswals said that they would not be issuing any comment at this stage, but will pursue the court cases. The Oswals have been involved in nearly 15 legal proceedings.

© Copyright Neena Bhandari. All rights reserved. Republication, copying or using information from any www.india-voice.comcontent is expressly prohibited without the permission of the writer and the news agency through which the article is syndicated.


Indian firms line up for coal mining joint ventures in Australia

© Neena Bhandari, Business Standard, India

High quality coal, good infrastructure, political stability and the ease of doing business has made Australia the preferred coal supplier for India, with many Indian private companies acquiring mines and setting up joint ventures to tap into the continent’s vast reserves.

“With large high-quality reserves of all coal types, Indian investment is a valuable component in the rapidly expanding Australian coal industry,” Arun Kumar Jagatramka, chairman and managing director of Gujarat NRE Coke, told this correspondent.

Gujarat NRE Coke owns and operates two hard-coking coal mines in New South Wales. It produces 1.5 million tonnes per annum (mtpa) of coking coal and plans to increase it to around six mtpa by 2015. This would make the company one of the top 10 hard-coking coal producers in the world. “With rising demand for coal of all forms and the emerging supply challenges of Indonesia, India should continue to seek opportunities in Australia”, says Jagatramka.

India sources its coal imports from Australia, Indonesia and South Africa. While coal mines in Indonesia, the world’s largest thermal coal exporter, are cheaper, recent changes to their tax regime, plus governance and infrastructure issues, have made Indian companies look at Australia.

In March, Lanco Infratech and Griffin Coal in Western Australia signed an AU$730 million deal. Lanco’s subsidiary Griffin Coal is fighting a $3-billion court case filled by Perdaman Chemicals over a dispute to supple coal to the latter's urea plant in western Australia. In August, the Gujarat-based Adani Group bought Linc Energy's Queensland coal tenements worth AU$2.72 billion and paid another AU$2 billion for the Abbot Point terminal near Bowen.

Last month, GVK acquired a 79 per cent stake in Hancock Coal's thermal coal assets in Queensland's Galilee Basin, worth AU$1.26 billion. Many Indian companies, GVK being one, are investing in what is referred to as ‘pit-to-port’, i.e from mine and mining equipment, land and sea transport, to the railway and port, to secure supply of the raw material.

Jindal Steel and Power Ltd. (JSPL) invested in coking coal exploration projects in Australia in 2009. It has four fully owned coal exploration blocks in the Bowen and Surat basins in Queensland and has started studies on these. It also has a 27.29 per cent stake in an ASX-listed coal exploration company. Jasbir Singh, JSPL (Australia) Director, told this correspondent, “We are currently mostly importing coking coal from Australia and a small percentage from Indonesia. The change in legislation in Indonesia may have an impact on future investments in Indonesia and we might expand more into Australia and Africa”.

The Australian Bureau of Agricultural and Resource Economics and Sciences predicts that Indian coal imports would rise from 60 mt in 2010 to 77mt in 2011, going up to 128 mt in 2016, accounting for 30 per cent of the increase in the global coal trade over the period.

“To sustain high economic growth, India needs to have an assured energy supply. This would mean getting it from wherever, provided price, quality and other parameters are met. Australia will naturally be an important supplier,” says Amit Dasgupta, consul general of India in Sydney.

India's rising coal import story applies strongly for both coking and thermal coal. India is short of good quality coal and infrastructure constraints will limit a stronger domestic response in the short to medium term. “It will come down to a question of price. The technology improvements in thermal power will mean low to medium-ranked Indonesian coal producers should be the big winners. Australia will also benefit due to its high level of available coal supply. Talk of Indonesia looking at banning coal exports under a certain quality would imply an even stronger supply response from Australia, although we think any ban would likely be watered down”, Mark Pervan, the head of commodity research at the Australia and New Zealand Banking Group, told this correspondent.

He says India will be even more leveraged or dependent on coking coal imports because of very low domestic reserves. “Australia is the big winner, as it dominates (and will continue to) seaborne supply,” he adds.

Australia is the world's largest coal exporter, accounting for 56 per cent of all steel-making coal traded by sea and 21 per cent of sea-borne thermal coal used in power generation.

© Copyright Neena Bhandari. All rights reserved. Republication, copying or using information from any www.india-voice.comcontent is expressly prohibited without the permission of the writer and the news agency through which the article is syndicated.

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