Ajay Gupta, Atul Gupta and Oakbay MD Jagdish Parekh. Picture: MARTIN RHODES
Ajay Gupta, Atul Gupta and Oakbay MD Jagdish Parekh. Picture: MARTIN RHODES

The Gupta family inflated the share price of a Oakbay Resources & Energy on its JSE debut by lending money to a Singapore firm to be used to trade the equities.

That came ahead of plans to raise funds for a uranium mine.

The Guptas, embroiled in a corruption scandal linked to President Jacob Zuma, agreed to lend $1m from bank accounts in Dubai to Unlimited Electronics & Computers (UEC) in Singapore in November 2014.

That same month, UEC transferred $928,146 to the Guptas’ Oakbay Resources & Energy and the two companies had a contract entitling UEC to 18.5-million Oakbay shares at R10 per share, according to a November 20 communication that was one of a trove of e-mails seen by Bloomberg.

The 2.31% stake in Oakbay was worth about R185m.

Oakbay employee Ronica Ragavan told UEC director Kamran Gani by e-mail on November 27 2014, a day before Oakbay listed, to instruct his brokers to sell 10,000 shares for R10.05 each and another 10,000 shares for R10.08 before December 5.

The 20,000 shares that traded on the Oakbay debut set the share price at R10.08, giving the company a market value of more than R8bn. That was more than 48 times its full-year revenue. Most Johannesburg-based mining companies have revenue that exceeds their market value.

The volume of shares that traded on Oakbay’s listing day was the highest ever recorded for the stock. It set an indicative price for future fund raising and determined how much equity would be needed to pay off a loan from the Industrial Development Corporation.

“Trade is supposed to be an honest deal, setting an honest price,” said Clinton van Loggerenberg, a director at law firm ENSafrica. “In principal it does sound like something that should be investigated further.”

The communication between Ragavan and UEC, and subsequent stock trading, is another example of how the Gupta family has become involved in allegations of corruption that have become the biggest post-apartheid scandal in SA.

The president, his son, state firms and international companies including McKinsey, KPMG and SAP have been implicated in dealings with the Guptas or companies linked to them.

The Guptas have been accused of interfering with Cabinet appointments and using political connections to win favourable contracts from state companies.

Zuma, his son Duduzane and the Guptas have denied wrongdoing.

Some of its KPMG’s senior staff in SA, including the local head, quit after an internal probe and KPMG said it would give the money it made from dealing with the family to charity.

SAP has reported the conduct of some its employees to US regulators; and McKinsey is reviewing its practices and will suspend work with state-owned companies in the country.

Uranium mine

In its pre-listing statement published on November 21 2014, Oakbay said that in the 12 months following the listing it would need to raise at least R800m from investors to start production at its uranium mine, and the Guptas’ closely held investment company was willing to reduce its shareholding in the publicly traded company.

Having loaned Oakbay R250m in 2010 to help it develop its business, the IDC agreed to have its investment converted to shares at a 10% discount when Oakbay began trading.

The IDC said UEC’s investment helped reassure it about the value of the company.

“The IDC asked for and was given an assurance that UEC was not a related party to any of the shareholders of Oakbay at the time,” it said in a statement to Bloomberg.

Oakbay Resources delisted this year after directors resigned, and its sponsor and transfer secretaries quit, amid press reports about the relationship between the Guptas and Zuma. The Guptas and the president have denied wrongdoing.

‘Think big’

Gani, who was visited by Bloomberg at his 5th floor offices in an industrial part of Singapore on October 19, where he sat beneath a framed dollar bill and the words “Think Big”, said he did not have time to respond to questions and might comment at a later date.

Gary Naidoo, a spokesman for the Gupta family, did not respond to e-mails or messages left on his mobile phone. Ragavan referred questions to Naidoo.

Oakbay’s audits from KPMG in SA helped convince Sasfin Holdings to manage its listing as its sponsor, a stock exchange requirement, a person familiar with the situation said.

The e-mails show Oakbay used its bank account with Absa to receive the money from UEC.

KPMG and Sasfin said they found nothing concerning when they assessed Oakbay.

Absa, which later closed Oakbay’s accounts, did not comment on the UEC transfers when sent queries by Bloomberg, citing client confidentiality.

The IDC said it was now considering its legal options because it thought UEC was a public investor in Oakbay and not linked to the Guptas.

This year “the JSE market regulation division decided to provide details of the trading just after the listing to the Directorate of Market Abuse for further investigation”, JSE CEO Nicky Newton-King said. She was referring to a unit of the Financial Services Board, which regulates part of the financial services industry.

“A preliminary investigation was registered and is currently in progress,” the FSB said.


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