The Curious Case of Helios and Matheson Information Technology Ltd

How many of you invest in corporate fixed deposits for one or two percent extra interest to that of bank fixed deposits??. Here is the curious story of Helios and Matheson Information Technology Ltd, a Chennai based IT and consulting company. As an investor, we would be looking for two main factors while investing in a company - Is the company making continuous profit? , Is the company rewarding its investors by paying dividend ??

Crisil Report Published After Q3FY13

Well, see what Helios and Matheson Information Technology Ltd about us page tells to us..

we came out with our initial public offer (ipo) of equity in 1999. we are listed in india on the national stock exchange (heliosmath), the stock exchange, mumbai (helios mat i; 532347) , bloomberg code (hmit in) and madras stock exchange (hms). we have a track record of uninterrupted profits (60 straight quarters) and dividend distribution since inception.

Based on these rosy pictures, many investors bought the stocks of H&M, many others put their life savings to the corporate Fixed Deposit offered by the company. Please go through below events and understand what happened to them.
 
H&M History of Events

•  1991 - Express Financial Exchange Pvt. Ltd. founded
•  1995 - Goes public and becomes Express Financial Exchange Ltd.
•  1999 - Changes name to Helios and Matheson Information Technology Ltd.           commences accepting Fixed Deposits from public

•  2005 - H&M investigated into for financial irregularities
•  2010 - H&M declares 55 cr profit and 15% dividend
•  2011 - H&M declares 59 cr profit and 15% dividend
•  2012 - H&M declares 74 cr profit and 15% dividend
•  Feb 2013 - Largest team of economy and industry research analysts in India, CRISIL gives highest rating to H&M of 5/5 . Stock hits all time high of Rs.250

•  Aug 2013 - Central Govt. announces new law Companies Act, 2013 relating to governance of companies and new rules for acceptance of Fixed Deposits by such companies in order to protect investors. As per the new law before accepting/renewing deposits from the public the companies must comply with certain conditions including obtaining minimum credit ratings. With respect to already accepted deposits, the companies must repay the same along with interest within 1 year of the commencement of the new law or as and when the deposit becomes due provided the companies comply with the provisions of the new law.

•  Sep 2013 - H&M declares 77 cr profit and 50% dividend
•  Apr 2014 - Companies Act 2013 notified. H&M barred from accepting / renewing deposits from the public as H&M does not comply with requirements of law. However H&M continues to accept / renew deposits.
• Jun 2014 - H&M starts partially defaulting in repayment of fixed deposits and interest amounts thereon. Post dated cheques bounce.
• Sep 2014 - CRISIL downgrades H&M credit rating to 2/5

• Dec 2014 - H&M completely stops repayment of fixed deposits and interest amounts thereon. Post dated cheques bounce.
• Jan 2015 - Investors begin legal proceedings in various cities.   
• Apr 2015 - Economic Offences Wing (EOW) of Tamil Nadu police has arrested three directors of Helios and Matheson Information Technology (H&M) for failing to repay deposit and interest to several depositors.
• Jun 2015 - H&M obtains temporary order from Madras High Court in Winding Up Petition which permits temporary freedom to key officials. As ordered by Madras High Court H&M presents a scheme for repayment.
• Jul 2015 - H&M challenges EOW action by filing Writ Petition in Madras High Court
• Aug 2015 - Madras High Court dismisses H&M Writ Petition and deems EOW action valid. H&M appeals. Loses appeal.

• Sep 2015 - H&M appeals to Supreme Court and obtains temporary order restraining EOW action subject to H&M depositing 10 crores as security before Madras High Court by Oct 2015 and further 38 crores by Oct 2016.
• Oct 2015 - H&M fails to comply with Supreme Court order and does not deposit 10 crores. Supreme Court dismisses H&M's appeal.
• Nov 2015 - BSE issues notice to delist H&M for non-compliance of Clause 41 of Listing Agreement.
• Jan 2016 - Madras High Court issues winding up order against H&M.
• Feb 2016 - H&M files appeal against winding up order.

Below is one among hundreds of complaints registered in complaintboard.in website

I Megha nariman and my mother Poonam talreja Live in mumbai we have invested in Fixed deposit the total amount is 18.50 lacs in Helios and Matheson information technology Ltd Chennai the company has defaulted in paying my Principal amount since October 2014 which has been matured since 2 years and they have stopped paying the interest My mother is mentally unstable,diabetic and old. She needs me all the time. We have no means to run the house except I had put all my and her savings into fixed deposits with a chennai based company called helios and mathenson. The Managing Director Mr Murali Krishan The Chairmam Mr Ramchandra I have been visiting to chennai office and met the director also Mr Diwakar just giving false promise they will pay the money My mother Poonam Talreja is suffering from diabities and she is pschizophina a mental disorder she is unstable and old I have to look after her and be with her most of time I am in a emergency need of money for my mothers treatment and medicines which is highly expensive and the doctors recommend me to treat my mother who is very Sick mentally and physically please I request you to help me

The case is still in court and  investors are waiting for the mercy of these culprits.

Key Takeaways For Us

• Never put all your eggs in one basket!!
• Invest only if you know the trustworthiness of management
• Exit the stock at the first sign of unsound act of management.
• Corporate FD that comes at a higher coupon rate has a lower credit rating. Never go for it. If a normal bank FD can give you 9% annual return, why should we risk our hard earned money for 1 or 2%  extra??
• If you want to invest in corporate FDs, look for AAA rated ones. According to Crisil, Bajaj Finance Ltd, Sundaram Finance Ltd, Housing Development Finance Corp. Ltd, Hero Motocorp Ltd, and Havells India Ltd are some of the top AAA rated company FDs.
• And finally, never blindly believe  the research reports, even if they come from the best!!