The project of opening 200 retail outfits in India, by Damas, is on standby, and seems almost unlikely to materialise, following the company’s financial situation. As reported by the company, its latest financial statement for the six months to September last year, noted cash balance as Dh135m. The company yet has to reach a formal standstill regarding Dh4 billion it owes to over 20 banks, and a Dh367,000 fine imposed by the Dubai Financial Services Authority (DFSA), which make it almost unlikely for its Indian venture to shape up. The unauthorised transactions by the three Abdullah brothers, who are members of the company’s founding family, led to depletion of the company finances.
Damas and Indian retailer Gitanjali Group have a joint venture with Damas as a 51 percent stakeholder. Gitanjali was to initiate the first 30 Damas-branded stores in its next financial year, which will begin in April 2010, but it has not yet received the initial investment of US$32.9 million (Dh120.8m) from Damas, reports say. The stores were planned to be set up within the next three years and Damas had estimated that the new stores would have represented about 20 per cent of its business.
Reports say that following the financial chaos, the working capital of the company could well lead it to reducing its business. Tawhid Abdullah had earlier disclosed undertaking unauthorised transaction worth Dh600m and had stepped down from his post in the company. Along with his brothers, Tawfique and Tamjid, the three had entered into a formal agreement to repay the company in 18 months, else to return 350 million of their shares.
In addition, the DFSA had served record fines on Damas and the Abdullah brothers, and dissolved the company’s board of directors post a five-month investigation into the unauthorised transactions. A Dh2.57m fine was imposed on the company, which now has to pay Dh367,000 within 30 days, while the remainder fine has been suspended, if it meets the DFSA’s requirements.
The DFSA concluded that the Abdullah brothers had used the bank accounts of Damas for personal use. Amongst the transactions was a Dh294m loan was sanctioned to Dubai Ventures, a unit of Dubai Holding, and was converted into an investment which turned out to be worth only Dh73.5m. The loss led the company to realign and postpone its debt payments, reports add.