Special to Firstpost
By Revathi Pogadadanda & VK Shashikumar, THL-Mediagrove
Last Friday, YS Jagan Mohan Reddy, son of the late Andhra Pradesh Congress Chief Minister YS Rajasekhara Reddy, registered a thumping win over his hapless Congress rival in the Kadapa Lok Sabha by-election. Reddy, 39, polled 687,068 votes, yielding him an almost unheard of victory margin of 5,43,053 votes over Ravindra Reddy of the Congress.
Yet, this hyperpopular mandate – meant to prove that he is YSR’s true political heir - has been built on what looks like a fib. According to his election affidavit, Jagan Reddy is India’s richest Member of Parliament with declared assets (net of liabilities) valued at Rs 365 crore. His wife has properties, cash and jewellery worth Rs 47.25 crore (net of liabilities). That a mere MP can accumulate so much wealth is anyway cause for concern; that he has not disclosed all his assets – often held by proxies – shows how the powerful manipulate the system to accumulate wealth for their own ends.
What is going to earn him infamy is the fact that Jagan has misled the Commission about his assets. For example, he did not declare his palatial houses in Hyderabad and Bangalore worth over Rs 200 crore (see video).
His house in HUDA Heights, Lotus Pond area of Banjara Hills, Hyderabad, is under construction. Jagan has cleverly concealed his ownership of a massive mansion in Bangalore, which has a private helipad. It is located in the Green Belt area of Yelahanka. This property is valued at over Rs 100 crore (see video).
Jagan’s wealth would not have been problematic but for the speed with which he acquired it. In 2004, when Jagan’s father YSR Reddy was yet to become the Chief Minister of Andhra Pradesh, he had only Rs 8.19 lakh of assets. Clearly, being the son of a Chief Minister is not injurious to one’s acquisitive streak.
Five years later (in 2009), by the time YSR completed his first term as CM, his son’s assets together with that of his wife had jumped to Rs 77.40 crore. Just two years later, he and his wife were worth Rs 410 crore. And we know he hasn’t disclosed everything.
While little is known about the Bangalore property, details of how Jagan acquired the plots in the HUDA Heights Lotus Pond area of Banjara Hills are now available with Firstpost.
The sale deeds reveal a well-worn style of operation used by people who have something to hide. Documents accessed by Firstpost investigation partner THL-Mediagrove reveal how four 'front' companies (companies that are typically created to shield against legal or tax liability without any seeming operations) of Jagan acquired six adjoining plots in this manner:
- Marvel Infrastructure purchased Plot 6 in Huda Heights for Rs 4.31 crore
Records show that Harish Chenna Veerappa Kamarthy is the key person in Jagan’s companies. He is a director in Marvel Infrastructure. The company came into existence on 31 January 2006 and the other director is Ramesh Babu.
Both the directors invested Rs 1,000 each and the capital is Rs 26.42 crore.
On 10 April 2008, the company purchased plot no 6 in HUDA Heights for Rs 4.31 crore (Rs 4,31,88,990 to be exact). Official records accessed on behalf of Firstpost reveal that Rs 20.24 crore was invested into this company by Classic Reality, while Sandur Power’s investment is Rs 1.35 crore and Silicon Builders invested Rs 4.80 crore. All the three companies are owned by Jagan.
Jagan directly invested Rs 3.05 lakh in shares of in this company.
- Harish Infrastructure purchased Plot 8 for Rs 4.10 crore
The company was created on 18 January 2007 with Harish Chenna Veerappa Kamarthy and Jagan’s wife Bharathi Reddy as its directors with an investment of Rs 4.98 crore.
On 28 January 2008, the company purchased plot no. 8 in HUDA Heights for Rs 4,10,50,000 (Rs 4.10 crore). The shareholding pattern of this company, too, is interesting. While one of the directors, Harish Chenna Veerappa Kamarthy, invested just Rs 1,000, Jagan’s wife Bharathi Reddy invested Rs 98,000. Jagan’s Sandur Power invested Rs 4.97 crore.
The company lent Rs 40 lakh to an anonymous person in the 2007-08 fiscal year.
Documentation accessed by Firstpost’s partner THL-Mediagrove reveal that this company strangely does not have any operational expenditure that would naturally be incurred in running the company, including salary payment of its employees.
- Capstone Infrastructure purchased Plots 3 & 4 for Rs 4.47 and Rs 4 crore respectively
The company came into existence on 1 June 2007 with Harish Chenna Veerappa Kamarthy and AV Raju as its directors. Since inception, the company pays only Rs 25,000 towards the salaries of its employees, which is a poor reflection of the business operations of this infrastructure company.
Four months after its incorporation, on 13 October 2007, the company accomplished the purpose of its creation by purchasing plot no 4 in HUDA Heights for Rs 4 crore.
On 1 January* 2009, it spent Rs 4.47crore to purchase plot no. 3 in HUDA Heights.
Jagan’s Classic Realty has spent Rs 4.42 crore to acquire shares in the company.
Jagan’s Sandur Power – his key business interest apart from property - has invested Rs 1 lakh and Jagan’s Silicon Builders invested Rs 4.30 crore. The same company again invested Rs 1 crore and an anonymous company invested another Rs 70 lakh during this period.
- Utopia Infrastructure purchased Plots 2 & 7 for Rs 1.37 crore and Rs 3.76 crore.
Jagan’s uncle EC Gangi Reddy, aunt EC Suguna and his close associate B Ramesh Babu floated the company with just Rs 1 lakh on 12 June 2006.
Gangi Reddy and Suguna brought in Rs 50,000 each as their initial investment. A year after it was incorporated the company purchased a plot of land in HUDA Heights, Lotus Pond area of Banjara Hills, for Rs 3,76,63,000 (Rs 3.76 crore).
The company shows that in the 2007-08 fiscal year, it borrowed Rs 4.5 crore from ‘a’ company, the identity of which remains anonymous. In the year 2009-10, the company received Rs 1.80 crore as application money from Silicon Builders. But in reality, Silicon Builders is another front company of Jagan.
Except for Utopia Infrastructure, all of the above mentioned companies, which acquired the six plots of land in Banjara Hills, are mentioned in Jagan’s declaration of assets in his 2011 election affidavit. Capstone is indirectly mentioned through the ownership of Sandur Power and Classic Realty.
Jagan’s modus operandi is old-fashioned; open several companies, transfer funds from one company to another and use these front companies to acquire assets. In his 2011 election affidavit he has revealed his direct and indirect ownership of 11 companies. These are:
- Sandur Power
- Saraswati Power
- Carmel Asia Holdings
- Bharathi Cement Corp
- Kealawn Technologies Pvt Ltd
- Marvel Infrastructure
- Classic Realty
- Silicon Builders
- Swasti Power Engineering Ltd
Sandur Power Pvt. Ltd and Jagati Publication Limited (JPL) are Jagan’s flagship companies. JPL, in which Carmel Asia holds shares, operates his vast media business in Andhra Pradesh, including Sakshi TV Channel and Sakshi newspaper. At launch during the 2009 elections, JPL had managed to arm-twist many companies to invest in it, including Matrix Group, India Cement, Lanco, and, above all, B Ramalinga Raju, the Satyam promoter who is now in jail for mis-stating accounts and cheating investors.
A cursory glance at Sandur Power’s annual reports will show that it has several subsidiaries, such as:
- Classic Realty
- Harish Infrastructure
- Capstone Infra
- Silicon Builders
It is important to note that while Jagan has declared his shareholding status in all other companies in his 2011 election affidavit, he has not mentioned Utopia Infrastructure Pvt. Ltd.
It is clear from the manner in which these companies are structured that they are front companies of Jagan Reddy. Interestingly Jagan’s mouthpiece, Sakshi newspaper, on 9 September 2010 admitted the ownership of the HUDA Heights Lotus Pond (Banjara Hills) plots in the name of Jagan Reddy and Sharmila Reddy.
The newspaper report stated that Jagan owned 3,800 square yards (or 3,177.283 square metres) of the property in Banjara Hills, Hyderabad, and that his sister Sharmila Reddy owned 2,100 square yards (or 1755.867 square metres).
In effect, Jagan owns a 4,933.15 square metre plot in the poshest locality of Hyderabad. According to the current property rates in Hyderabad (if one goes by the current rate of Rs 5,737 per square feet in Banjara Hills) just the land price of this plot owned by Jagan Reddy is currently valued at Rs 30.46 crore.
But as mentioned earlier, the sale deeds of these plots show ownership in the name of four front companies of Jagan.
So Jagan's fancy palace, rumoured to be the biggest house in Andhra Pradesh, is being constructed on Plots 2,3,4,6,7 and 8 of HUDA Heights, Lotus Pond (Banjara Hills).
The floor plans show 14 escalators, 10 lifts, a mini-theater of 200 seating capacity, libraries, squash court, gyms, marble flooring in about 60 rooms and bathrooms which are of the size of a single bedroom flat.
The current construction cost in Hyderabad's Banjara Hills area is Rs 10,000 per square ft. So construction on Jagan's 4,933.15 square metres, or 53,099.984 square feet, would cost Rs 53.09 crore.
Add to this the cost of the land currently valued at Rs 30.46 crore. According to the sale deeds the price paid for the acquiring the land is Rs 22.04 crore.
Jagan’s undeclared opulence is bound to taint his Kadapa by-poll victory because he deliberately with-held information on his massive properties worth hundreds of crore in Hyderabad and Bangalore.
Several political parties in Andhra have demanded a CBI enquiry. Senior TDP politician Yanamala Ramakrishnudu told THL-Mediagrove: “There should be a detailed CBI enquiry of his properties. He also resorted to a lot of Fema (Foreign Exchange Management Act) violations. Till 2004 he was a struggling industrialist with no profits from any of his companies; today he owns one of the biggest business empires in Andhra. His modus operandi is simple, abuse of power and benami transactions”.
Congress’s official spokesperson Tulasi Reddy feels Jagan’s property dealings are just the tip of a mammoth corruption iceberg. “His properties must be thoroughly investigated. No company has seen the share values increase so much. This is the heights of corruption. We demand a thorough investigation and necessary action has to be initiated”.
Published Date: May 16, 2011 01:40 pm | Updated Date: May 08, 2012 04:00 pm