A few days ago I posted about Vijay Mallya and Anil Ambani. Today we are talking about Nirav Modi. Nirav Modi was from a Gujarati family. His father and uncle were in the diamond business. Nirav started his career with his uncle assisting him after 10 years with Mehul Choksi, he went to Mumbai and started his own factory.
His company was called Firestar Diamonds private limited. They were into the cutting and polishing business. Nirav at this time was a reputed man, he paid his workers on time, paid the suppliers on time, and even gave advances. His workers still see him as a god, he helped them a lot. The recently released Netflix documentary portrays Niravs life at the time as perfect. At least that's what everyone thought.
The polishing business is not the high end of the diamond business, Nirav did recognize this and wanted to go for retail business. He did a lot of research and found out what type of jewelry gets sold, how the auctions happened etc. Then he started his first store in India.
In an interview, Nirav told that the turning point was designing the lotus necklace which sold for $3 million. Yes, that's right, People started asking who is Nirav Modi, He then opened another store. All his events were fabulous he poured money into them. Soon he went global, had stores in London, Singapore, Hongkong, Newyork. He was suddenly competing with big players like Cartier.
For many Nirav was an inspiration, A Indian brand that made to the global market. He paid huge amounts for event sponsorship and magazine advertisements. Where was all this money coming from?
When a journalist told him about theories about his money source - As Mafia, Big industrialists and Maybe he had loans from a bank he denied, he denied all of it.
Let us take a look at what Nirav did. Nirav did not have any direct loans in Indian banks, instead, he took something called LoU, or letter of Undertaking. He used LoUs from Punjab National Bank and took loans from foreign banks. This was the easiest way to get money in foreign currency and its legal. But for getting LoU you have to provide collateral to the issuing bank. Which Nirav didn't give, he bribed bank officials so that he did not have to pay collateral.
Nirav did set up shell companies around the world and inflated the price of diamonds, He buys 5 million valued diamonds and sells them to his own shell company for 7 million he again buys it back for 8 million. this set of transactions inflated the value of diamonds.
Like every other fraud he did get caught, He wanted more amounts and he sent his representatives to the same bank Punjab National Banks or popularly known as PNB. This time bank asked for collateral and they looked into transactions.
Soon Nirav made it into headlines " The largest banking fraud in India- Nirav Modi on the run"
His shop and factory were sealed, all of a sudden the flamboyant billionaire was a fugitive. He was later arrested in London on an extradition requests by India. And is now facing charges in London.
