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

Ganga world's second most polluted river, Modi's Varanasi tops microplastics pollution

By Rajiv Shah  Will the new report by well-known elite NGO Toxics Link create a ripple in the powerful corridors of Delhi? Titled “Quantitative analysis of microplastics along River Ganga”, forwarded to Counterview, doesn’t just say that Ganga is the second most polluted river in the world, next only to Yangtze (China). It goes ahead to do a comparison of microplastics pollution in three cities shows Varanasi – the Lok Sabha constituency of Prime Minister Narendra Modi – is more polluted compared to Kanpur and Haridwar.

Madhya Pradesh tops India's 145 instances of 'anti-Christian atrocities' this year

Counterview Desk  A report prepared by the Religious Liberty Commission of the Evangelical Fellowship of India (EFI), founded in 1951 as the national alliance of evangelical Christians of the Protestant denomination, in its just-released report, “Hate and Targeted Violence against Christians in India: Half Yearly Report 2021”, has said that an analysis of 145 cases of violence it has documented against Christians, mainly by non-state actors, “stems from an environment of targeted hate.”

Demolition drive: Why aren't high-end hotels, farmhouses treated same way as Khorigaon?

By Our Representative A public hearing, sponsored by the civil rights group National Alliance of People’s Movements (NAPM) to hear the affected citizens of Khorigaon, off Faridabad, Delhi NCR, has seen local people complaining how their houses are being demolished even as the entire area was converted into a prison through heavy police deployment.

How real is Mamata challenge to Modi? Preparing for 2024 'khela hobey' moment

By Prof Ujjwal K Chowdhury*  Third time elected West Bengal Chief Minister, Mamata Banerjee is on a whirlwind tour of Delhi, meeting everyone who matters within and beyond the government, the Prime Minister, the President, some Cabinet ministers, Sonia and Rahul Gandhi, several other opposition leaders, et al.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

How BSF, police, court turned Bangladeshi woman slave victim into accused in crime

Counterview Desk  Civil rights leader Kirity Roy has strongly objected to the manner in which the Border Security Force (BSF) , the police and the judiciary in West Bengal have treated a 35 years old Bangladeshi woman victim of human trafficking, who was subjected to sexual exploitation for 15 long years, has been declared guilty of violating the Foreigners Act, violating all human rights norms.

Buddhist shrines massively destroyed by Brahmanical rulers in "pre-Islamic" era: Historian DN Jha's survey

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Khorigaon demolition: People being 'brutally' evicted, cops 'restricting' food, water

By Ishita Chatterjee, Neelesh Kumar, Manju Menon, Vimal Bhai* On July 23, the Faridabad Municipal Corporation told the Supreme Court that they have cleared 74 acres out of 150 acres. Despite the affidavit of the Municipal Corporation, the court, on the complaint of various litigants, that the arrangements for living, food etc. have not been made for the people. 

Covid impact on menstrual cycles? Young girls 'relapsing' back to unhygienic old-cloth rags

By Dr Sudeshna Roy*  Covid-19 pandemic has gripped the world in health and economic shock. Combating this public health crisis has diverted development resources earmarked for adolescents and the youth. India; having world’s second largest population; 1.38 crores as per UN mid-year 2020 estimation, also shelters the largest adolescents and young adult population, which at 243 million constitute 20% of the world’s 1.2 billion adolescent population.

Project launched to fight high malnutrition in Odisha's backward Malkangiri district

By Our Representative Odisha civil rights groups have launched a new project, which will cover 8,000 households under of Podia block in Odisha’s Malkangiri district in order to provide essential preventive medicine to the community through the trained village-based Swasthya Sathis (health workers) and fight malnutrition in the district’s rural areas.