MS Shoes

MS Shoes East Ltd. was an Indian footwear-export company established in Delhi on 17 March 1986. It grew out of a family shoe-export operation operated under the name Shoes East Proprietary and was led by Pavan Sachdeva, who took over the business from his father and developed it into a publicly financed company. Its principal commercial activity was the manufacture and export of footwear, with Western Europe among its important markets. The company expanded quickly during the late 1980s and early 1990s. It attracted investors through high-profile advertising, including campaigns created by the Delhi branch of Rediffusion, and received export and productivity awards during the 1986–1993 period. Its growth was supported by public offerings, rights issues, fully convertible debentures, and borrowing from financial institutions and banks. MS Shoes made its first public issue in September 1992 and followed it with a rights-cum-public issue of fully convertible debentures in November and December 1993. The company then pursued diversification beyond footwear. It sought to acquire or develop hotel assets offered by the Housing and Urban Development Corporation, including a proposed five-star hotel site and an existing four-star hotel complex with rooms, restaurants, and shops. It also explored yarn manufacturing. These plans were intended to be financed partly through a February 1995 rights-cum-public issue. The issue was undersubscribed and devolved to underwriters, undermining the expansion strategy. MS Shoes became associated with a dramatic rise and collapse in its share price. The shares reportedly traded at ₹24 in 1993 and reached ₹502.5 in January 1995 before the company’s market crisis. Allegations that the share price had been manipulated contributed to regulatory and criminal investigations. When the company collapsed in March 1995, the repercussions were sufficiently severe that the Bombay Stock Exchange closed for three days. The episode resulted in reported losses exceeding ₹270 crore and became a prominent example of the risks surrounding aggressive public issues, speculative market activity, and poorly supported corporate diversification. The Central Bureau of Investigation began investigating the case in 1995. It examined the conduct of company officials and the roles of other institutions, including officials connected with the Securities and Exchange Board of India and SBI Capital Markets. Pavan Sachdeva faced allegations relating to the Companies Act and the Prevention of Corruption Act. A closure report filed in 1998 was accepted by the court, but the investigation was reopened in 2003, when further civil and criminal proceedings followed. A Delhi court also issued a non-bailable warrant for Sachdeva in April 2003 in connection with an alleged failure to repay money owed to the Indian Air Force Benevolent Association. The company was referred to the Board for Industrial and Financial Reconstruction by order of the Delhi High Court in June 2003. In November 2005, BIFR declared MS Shoes a sick company and developed a rehabilitation scheme. Later company claims and filings described promoter contributions and efforts to convert those contributions into equity, while also asserting continuing rights connected with a hotel project. The available reference material does not establish a clear current operating status, successful rehabilitation, or a later return to normal commercial activity.

MS Shoes East Ltd. originated in a Delhi family footwear-export business trading under the name Shoes East Proprietary. Pavan Sachdeva took over the business from his father and launched MS Shoes in 1986. The company was formally established in Delhi on 17 March 1986, with footwear exports as its central activity. Its commercial focus included supplying Western European markets. During its first years, MS Shoes pursued rapid growth through external financing and investor solicitation. Advertising created by Rediffusion's Delhi office helped the company attract public attention and investment. Between 1986 and 1993, it received various awards connected with exports and productivity from bodies including the Council of Leather Exports, the Delhi Administration, and the National Productivity Council. These awards supported an image of a successful, expanding Indian export enterprise. The company entered the capital markets with a public issue in September 1992. In November and December 1993 it issued rights and public securities involving fully convertible debentures. The resulting market enthusiasm was reflected in its share price, which was reported to have risen from ₹24 in 1993 to ₹502.5 in January 1995. The scale and speed of the increase later became central to allegations that the price had been manipulated. MS Shoes also attempted to transform itself from a footwear exporter into a diversified business group. In 1994 it pursued hotel assets offered by the Housing and Urban Development Corporation. The proposed acquisitions included land for a five-star hotel and a constructed four-star hotel complex described as having 363 rooms, nine restaurants, and 25 shops. The reported aggregate bid was ₹177.10 crore. The company additionally considered entering yarn manufacturing. These projects increased the company's financing requirements and exposure to sectors outside its established footwear business. To support the diversification program, MS Shoes launched another rights-cum-public issue in February 1995. The issue was undersubscribed and devolved to underwriters. The failure damaged the company's financing plan, and HUDCO subsequently cancelled the hotel allotments and forfeited money reportedly paid by MS Shoes. The company's market position then deteriorated rapidly. In March 1995, the collapse of MS Shoes generated wider market disruption, prompting the Bombay Stock Exchange to close for three days. Reference material reports that more than ₹270 crore was lost and that underwriters were held liable to the extent of ₹98 crore. The collapse led to investigations and legal proceedings. The CBI began an investigation in 1995 and in 1997 sought permission to bring charges against senior officials connected with SEBI and SBI Capital Markets. Sachdeva was charged in relation to alleged violations of the Companies Act and the Prevention of Corruption Act. The CBI submitted a closure report in September 1998, which the court accepted. The matter was not permanently concluded, however: the investigation was reopened in 2003 and several civil and criminal actions followed. In April 2003, a Delhi Metropolitan Court issued a non-bailable warrant against Sachdeva concerning an alleged failure to repay money owed to the Indian Air Force Benevolent Association. In June 2003, the Delhi High Court ordered that the company be referred to BIFR. In November 2005, BIFR declared MS Shoes a sick company and prepared a rehabilitation scheme. Later material describes promoter contributions, including amounts brought in during the periods ending 31 March 2011 and March 2014, and proposed conversion of those contributions into equity. The company also continued to assert an interest in a five-star hotel project. The available sources do not clearly document whether the rehabilitation plan was completed or whether MS Shoes resumed ordinary operations, so its present status remains uncertain.

• 2005

  Declared a sick company

  [1]MS Shoesen.wikipedia.org

  BIFR declared MS Shoes a sick company and formulated a rehabilitation scheme.

• 2003

  Investigation reopened and BIFR referral ordered

  [1]MS Shoesen.wikipedia.org

  The CBI reopened the case, while the Delhi High Court ordered that the company be sent to BIFR.

• 1998

  Court accepts CBI closure report

  [1]MS Shoesen.wikipedia.org

  A closure report submitted by the CBI in the MS Shoes investigation was accepted by the court.

• 1995

  Public issue fails and company collapses

  [1]MS Shoesen.wikipedia.org

  A February rights-cum-public issue was undersubscribed, and the subsequent March collapse caused severe market disruption, including a three-day closure of the Bombay Stock Exchange.

• 1994

  Hotel diversification bids

  [1]MS Shoesen.wikipedia.org

  The company pursued HUDCO hotel-related assets as part of a diversification strategy beyond footwear exports.

• 1993

  Convertible-debenture issue and peak growth period

  [1]MS Shoesen.wikipedia.org

  MS Shoes issued rights and public securities involving fully convertible debentures in November and December, while its share price reportedly traded at ₹24 during the year.

• 1992

  First public issue

  [1]MS Shoesen.wikipedia.org

  The company entered the public market with its first public issue in September.

• 1986

  MS Shoes established in Delhi

  [1]MS Shoesen.wikipedia.org

  MS Shoes East Ltd. was established on 17 March 1986 as a successor or expansion of the Shoes East family footwear-export business.

A Delhi-based footwear exporter that positioned itself as a fast-growing, investor-funded Indian manufacturer with an international export orientation, particularly toward Western Europe.

• Footwear · 1986

  Export footwear

  MS Shoes was primarily a manufacturer and exporter of footwear. Its original business served overseas customers, especially in Western Europe, and formed the operational base from which the company later attempted to diversify into hotels and yarn manufacturing.

• Hospitality diversification · 1994

  Hotel-development projects

  The company pursued hotel-related assets offered by HUDCO, including a proposed five-star hotel site and a four-star hotel property. These were diversification projects rather than established MS Shoes consumer products, and the reported allotments were later cancelled after the public issue failed.

• Textile diversification · 1995

  Yarn manufacturing venture

  MS Shoes explored entry into yarn manufacturing as another diversification initiative. The available source describes the venture as a planned project intended to be supported by public-market financing, not as a clearly established operating product line.

• 2003

  Reopened criminal and civil proceedings

  After an earlier closure report had been accepted, the case was reopened and additional civil and criminal proceedings were pursued. A Delhi court also issued a non-bailable warrant against Pavan Sachdeva in a repayment-related matter.

  Source

• 1995

  Share-price manipulation allegations and market collapse

  MS Shoes became the focus of allegations that its share price had been manipulated. The subsequent collapse caused major losses and contributed to a three-day closure of the Bombay Stock Exchange.

  Source

• 1995

  CBI investigation into company and institutional conduct

  The CBI investigated alleged violations involving MS Shoes and examined whether senior officials associated with SEBI and SBI Capital Markets should face charges.

  Source

Read more

• 1986Investor-attraction advertising

  India

  MS Shoes used distinctive advertising created by the Delhi branch of Rediffusion to attract investors and promote the company's growth story.

  Outcome. The advertising contributed to the company's visibility during its expansion and capital-raising period.

  Source

• 2005

  BIFR rehabilitation schemeStrategy

  Background

  Following the collapse, litigation, and financial distress, the company entered India's industrial-sickness resolution framework.

  Action taken

  BIFR declared MS Shoes sick and devised a rehabilitation scheme.

  Aftermath

  Later material referred to promoter contributions and proposed conversion of those contributions into equity, but the ultimate outcome of the rehabilitation is not established by the available sources.

  Source

• 1995

  February rights-cum-public issueOther

  Background

  The company needed capital to finance its hotel and yarn projects.

  Action taken

  MS Shoes launched a rights-cum-public issue involving its expansion plans.

  Aftermath

  The issue was undersubscribed and devolved to underwriters, contributing to the company's financial crisis and the cancellation of the HUDCO allotments.

  Source

• 1994

  Diversification into hotels and yarnStrategy

  Background

  After building its footwear-export business, MS Shoes sought growth outside its core industry through hotel acquisitions and a planned yarn-manufacturing venture.

  Action taken

  The promoter pursued HUDCO hotel properties and prepared financing for additional diversification through a public issue.

  Aftermath

  The diversification plan increased financing pressure and was disrupted when the February 1995 issue was undersubscribed and HUDCO cancelled the hotel allotments.

  Source

1. 1MS Shoesen.wikipedia.org