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September 7, 2018

Indian bankers proclaim test case for brand valuation

Indian ICICI Bank, the lead banker to the Mehul Choksi-promoted Gitanjali Gems, has recently sought to attach various properties of the group under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act to recover multiple loans amounting to over Rs 800 crore. The assets sought to be attached by the lender include the brands Gili, Sangini and Asmi owned by Gili India and Nakshatra Brand – among other. The Sarfaesi Act allows lenders to attach and sell property of defaulters and their guarantors.

Choksi’s Gitanjali Gems was subjected to a forensic audit by BDO India for alleged fraud. The scam also involves entities owned by Choksi and his nephew Nirav Modi in the US filing for bankruptcy (Firestar Diamond Inc., Samuels Jewelers Inc.). According to bankers, after Kingfisher Airlines, this will be a test case in brand valuation. In the case of Kingfisher, lenders have not got bidders even at a tenth of what the airline brand was valued at during the loan disbursement. Gitanjali Gems had claimed in 2009 that a valuation done by UK-based Brand Finance had valued the Gili, Nakshatra, D’damas and Asmi jewelry brands at Rs 1,502 crore. In 2011, the valuation of these four brands was augmented to Rs 2,769 crore. It remains to be seen if and for what price these brands will find a buyer. And if brand valuation can catch up some of its lost reputation in India.

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