MUMBAI: Shock and fear are the underlying emotions at Bharat Diamond Bourse (BDB), Mumbai’s major diamond trading hub, a day after well-known jewellery designer Nirav Modi and his uncle Mehul Choksi of Gitanjali Gems were found to be allegedly involved in a Rs 11,000-crore fraud that has rocked Punjab National Bank (PNB).
While speculation is rife about the magnitude of the scam at the 20-acre sprawling BDB complex, most traders and manufacturers fear the fallout from the latest imbroglio to hit the industry. “Reputation risk is paramount to our industry,” said Sanjay Kothari, co-owner of Kunal Diamonds, a Rs 100-crore turnover jewellery manufacturer. “Reputed, established players will pay the price for misdemeanours of a few…. banks will scan each and every one before extending credit…credit to diamantaires will most surely slowdown, at least for a while.”
But, the bourse’s president Anoop Mehta is quick to play down the impact. “The air is thick with shock, but let’s remember this is a fraud and not a company going belly-up because of ‘vanishing clients’ or some industrywide malpractice. Given that, I don’t think established, and genuine traders and manufacturers will have problems accessing bank credit.”
Mehta also says that it’s still “early” to “definitively” make a judgement
on modus operandi or quantum of fraud as things are still unclear and being investigated. “I think the air will clear in a day or two from now.”
Aside from the Rs 11,000 crore fraudulent transactions, what’s at stake is also money owed to banks by Gitanjali and Modi’s firms. For eg, Gitanjali’s bank indebtedness stood at a little over Rs 5,000 crore at the end of FY17. Speculation is also rife whether Modi will return to India, given that the CBI finds the case one of fraud, which, if proven, could land the guilty behind bars.
A Gitanjali spokesperson claimed that Choksi was not complicit in the fraud. In Diamond R US, one of the three firms named in the CBI FIR, Choksi retired as partner way back in 1999 and had nothing to do with the firm for the said period under scrutiny (2017) and a decade prior. He had nothing to do with Solar Exports and Stellar Diamonds “in any capacity”, added the spokesperson.
Choksi is believed to be undergoing a heart surgery on Thursday in New York, while rumours abound in BDB that Modi is currently in Switzerland, having moved there from either China or Hong Kong.
Some sources claimed that Modi had got wind of the impending problems way back in November, and had taken “advice” from “experts” back then. Underscoring the palpable shock about the scam’s magnitude, well-known chartered accountant Bhargav Vaidya, who counts reputed diamantaires among his clients, said, “I just hope the figure is not true. If it is it will affect the moral fibre of the whole industry. The reputation risk is too high.”
Even as facts around the scam evolve with each passing hour, BDB’s denizens hope that the contagion doesn’t spread to an industry that on average earns foreign exchange of $5-6 billion each year.