Skip to main content

Mystery around Gujarat PSU 'transfer' of Rs 250 crore to Canadian firm Karnalyte

By AK Luke, IAS (Retd)*
While returning from a Board meeting of the Oil India Limited (OIL) in Ahmedabad some time in 2012, two officers of the Gujarat State Fertilizers and Chemicals Ltd (GSFC), Nanavaty and Patel,  saw me off at the airport. They said they were proceeding to Canada in connection with a project GSFC had entered into with a company there. As we were running late, I hastily wished them the best.
Later, it appeared that the company was Karnalyte Ltd and it was for a potash mining project in Canada. Sanjiv Varma, the officer dealing with the project, later told me over phone that the entire GSFC contribution of Rs 250 crore had been transferred to the project in Canada (GSFC had stated in a notice that Varma would answer all queries on this project and provided his number). I thought this odd as such contributions are normally in stages matching project progress.
Even odder was GSFC going in for a mining project when potash was readily available in the international market; in my time in GSFC no shortage of potash was faced. GSFC had never tied up for such backward integration of raw material except when, again in my time (2003-06), we took a small equity for Rs 25 crore, if my memory serves me right, with Groupe Chimique Tunisian (GCT) of Tunisia for phosphoric acid. Its production was mainly confined to Morocco and Tunisia, and as position was tight at times, we imported it in large quantities.
Did GSFC, acting speedily, ensure the return of its Rs 250 crore? If so, it is to be complimented. If not, a deeper probe is called for
Our potash requirement was never so large as to justify a backward integration investment in a distant land. I continued tracking the project for a short time over the net, as Karnalyte was reporting on its status presumably as per Canadian law. GSFC was silent on its sites. I then lost interest. 
A month back I saw the Karanlyte shares which the GSFC had purchased for Canadian $ 8.15 had come down to  $ 0.2 per share, today it is $ 0.17. Effectively the GSFC investment of Rs 250 crore buying 5.19 million shares at Canadian $ 8.15 per share has come down to approximately Rs 6 crore, a diminution of approximately 98% .
From the Karnalyte site it appears the project itself may not have come up. Strangely, three GSFC officials are shown as Directors of Karnanlyte. It also appears GSFC was planning to further provide backup finance to this project for $700 million. This apparently did not happen, the only saving grace in the entire saga.
As the project for which the Rs 250 crore was invested by GSFC does not appear to have come up, it is possible GSFC, acting speedily, ensured the return of its Rs 250 crore. If so, it is to be complimented. If not, a deeper probe is called for.
All the material for this piece is from open domain sites mentioned below and none are from any source within GSFC, except where explicitly stated above. My two recent e-mails to GSFC asking for details are not yet answered.

References:

  1. https://www.livemint.com/Companies/V1amJHhe5WuseY13z7qGFO/GSFC-to-buy-20-in-Canadas-Karnalyte.html
  2. https://www.google.com/search?q=karnalyte+resources+inc+share+price&rlz=1C1CHBD_enIN853IN853&oq=Karnalyte&aqs=chrome.1.0l7j69i61.8190j1j7&sourceid=chrome&ie=UTF-8
  3. http://karnalyte.com/news/press-releases/karnalyte-resources-inc-announces-2019-third-quarter-results/
  4. https://www.prnewswire.com/in/news-releases/karnalyte-resources-inc-announces-agreement-in-principle-for-approximately-700-million-usd-in-financing-for-phase-1-potash-mine-and-spin-out-of-secondary-mineral-assets-and-unexplored-lands-571990241.html

---

*Ex-managing-director, GSFC (2003-06)

Comments

Sir,
Not only Karnalite, GSFC could not implement any project within time & cost estimate after year 2003-04. Why ? Board of GSFC must look into it for survival & progress of Co.
Anonymous said…
Excellent article Sir. It is just as puzzling for the shareholders of Karnalyte Resources Inc as the company has continued a downward spiral since GSFC's involvement in 2013 when the $45 million dollar investment was made.

That equity investment brought in to Karnalyte was intended for the advancement of Karnalyte's sole asset, the Wynyard potash project, but the vast majority of that money has been spent on everything but advancing the project to the next stage.

Approximately $100 million (CAD) had been spent on advancing the project to the construction ready stage prior to GSFCs involvement in 2013.

It is reported the shares purchased in the financing are held as collateral by one of the banks in India, which as you correctly point out, the value of those shares have been decimated.

According to corporate reports from Karnalyte, the company is now changing its primary focus to building a nitrogen facility in Saskatchewan, despite failed attempts by others in the industry due to viability issues.

In December, GSFC purchased an additional 11 million shares of Karnalyte through a .17 cents rights offering, which included a peculiar clause to allow GSFC to purchase other shareholders rights against their will.

Now with allegations of breaches of Canadian securities law, alleged involvement in vote irregularities, suing individual shareholders, and the suspicious rights offering that awarded both Board and voting control of Karnalyte to GSFC, I agree 100% with you that an investigation should be requested by both countries officials.
into exactly what has gone on.






TRENDING

India under Modi among top 10 autocratizing nations, on verge of 'losing' democracy status

By Rajiv Shah
A new report, prepared by a top Swedish institute studying liberal democracy, has observed that there has been a sharp “dive in press freedom along with increasing repression of civil society in India associated with the current Hindu-nationalist regime of Prime Minister Narendra Modi.” The report places India among the top 10 countries that “have autocratized the most”. Other countries that have been identified for rolling towards autocracy are -- Hungary, Turkey, Poland, Serbia, Brazil, Mali, Thailand, Nicaragua and Zambia.

Savarkar 'criminally betrayed' Netaji and his INA by siding with the British rulers

By Shamsul Islam*
RSS-BJP rulers of India have been trying to show off as great fans of Netaji. But Indians must know what role ideological parents of today's RSS/BJP played against Netaji and Indian National Army (INA). The Hindu Mahasabha and RSS which always had prominent lawyers on their rolls made no attempt to defend the INA accused at Red Fort trials.

Border conflict? RBI nod India's 'brotherly' help to China internationalise its currency

By Bhabani Shankar Nayak*
In the middle of a global pandemic, China started an unprovoked border conflict with India. It unraveled trust deficit and ties between the two neighbours. As thousands of Chinese troops tried occupying Indian territory, the Narendra Modi-led BJP government directs the Reserve Bank of India (RBI) to allow the Bank of China to start regular banking services in India. The Bank of China will now operate in India like any other commercial banks.

RSS supremo Deoras 'supported' Emergency, but Indira, Sanjay Gandhi 'didn't respond'

By Shamsul Islam*
National Emergency was imposed on the country by then Prime Minister Indira Gandhi on June 25-26, 1975, and it lasted for 19 months. This period is considered as ''dark times' for Indian democratic polity. Indira Gandhi claimed that due to Jaiprakash Narayan's call to the armed forces to disobey the 'illegal' orders of Congress rulers had created a situation of anarchy and there was danger to the existence of Indian Republic so there was no alternative but to impose Emergency under article 352 of the Constitution.

Letter to friends, mentors: Coming together of class, communal, corona viruses 'scary'

By Prof (Dr) Mansee Bal Bhargava*
COVID greetings from Ahmedabad to dear mentors and friends from around the world…
I hope you are keeping well and taking care of yourself besides caring for the people around you. I’m writing to learn how is the science and the society coping with the prevention and cure of the pandemic. I’m also writing to share the state of the corona virus that is further complicated with the long-standing class and communal viruses.

Clean chit to British rulers, Muslim League? Karnataka to have Veer Savarkar flyovers

By Shamsul Islam*
The BJP government of Karnataka led by BS Yediyurappa is going to honour Hindutva icon VD Savarkar by naming two of the newly built major flyovers in Bangalore and Mangalore after him. There was a huge uproar against this decision of the RSS-BJP government as many pro-Kannada organisations with opposition parties and liberal-secular organizations questioned the logic to ignore so many freedom fighters, social reformers and others from within the state.

Hurried nod to Western Ghat projects: 16 lakh Goans' water security 'jeopardised'

Counterview Desk
Taking strong exception to "virtual clearances" to eco-sensitive projects in the Western Ghats, the National Alliance of People’s Movements (NAPM) in a statement has said urged for a review of the four-lane highway, 400 KV transmission line and double tracking of the railway line through the Bhagwan Mahavir Wildlife Sanctuary and Mollem National Park in Goa.

Disturbing signal? Reliance 'shifting focus' away from Indian petrochemical sector

By NS Venkataraman*
Reliance Industries Ltd (RIL), a large Indian company, has expanded and grown in a spectacular manner during the last few decades, like of which no industrial group in India has performed before. RIL is now involved in multi various activities relating to petroleum refineries, petrochemicals, oil and gas exploration, coal bed methane, life sciences, retail business, communication network, (Jio platform) media/entertainment etc.

Case for nationalising India's healthcare system amidst 'strong' private control

Counterview Desk
A draft discussion note, prepared by Dr Maya Valecha, a Gujarat-based gynecologist and activist, sent to the People's Union for Civil Liberties (PUCL) as also a large number of activists, academics and professionals as an email alert, is all set to create a flutter among policy experts for its strong insistence on nationalizing India’s healthcare system.