West Bengal woke up today to prominent ads in newspapers put out by a company called Rose Valley, appealing to its investors not to panic in the wake of the collapse of the Saradha group's chit fund, which has wiped out the savings of lakhs of small depositors in the state.
The ad promises that none of Rose Valley's investors will be duped and asks them to keep the faith.
Faith, however, is running short as panicky investors demand their money back fearing another Saradha-like collapse. In Kolkata's Behala, a Rose Valley office was ransacked this morning. The company's ad regrets another attack by "hooligans" on one of its offices "thinking we fall under the same strata" as Saradha.
Rose Valley is one of at least five companies that market regulator Securities and Exchange Board of India or SEBI is investigating for alleged fraud in West Bengal. The Rose Valley group has raised Rs. 4000 crore and a collapse could lead to a bigger crisis than the Saradha bust.
After the Saradha scare, worried depositors who queued up at branches of Rose Valley in Durgapur to collect their money before maturity, were sent back not with cash, but coupons and a handwritten receipt that shows the amount invested and how much the company owes the person now.
Like the Sudipta Sen-owned Saradha, Rose Valley has a media division and owns four television channels.
According to SEBI, Rose Valley's two companies raised more than 4000 crores. Potential damage can be gauged from the collapse of Saradha, which had raised about a quarter of what Rose Valley has at an estimated Rs. 1200 crore and has wiped out the savings of lakhs and lakhs of small investors, also hitting about 3.5 lakh fund collection agents, many of whom had invested in it.
The market regulator had issued a restraining order against Rose Valley in 2011, but says the group has used delay tactics and court battles to stall action against it while it continues to raise money from depositors. The group's firm in West Bengal, Rose Valley Real estate and Constructions Ltd has raised Rs. 1270 crore from investors, SEBI says. Its hotels and entertainment company, which was shut down by the Jharkhand government last year, had raised more than 2900 crores.
Last month, SEBI imposed a penalty of one crore on Rose Valley and filed an FIR against its officials.
A SEBI document that NDTV has exclusive access to says that the regulator has for the last year been warning the West Bengal government and even the general public, through newspaper campaigns, about fraud chit fund schemes in the state. It had Saradha under its scanner for some time now.
West Bengal Chief Minister Mamata Banerjee said yesterday that she had received a letter from SEBI about two months ago about a chit fund, but would not say which chit fund.