Why would Arun Pandey start 10 companies in a month?

NEW DELHI: Indian cricket captain Mahendra Singh Dhoni’s business partner’s move to open multiple companies within a month has raised eyebrows, but it is not as rare as you might think.

Arun Pandey, Dhoni’s business associate, had floated 10 firms in April 2012 as he went on an as-yetunexplained expansion drive.

Tax experts say opening multiple companies is not a common practice but often firms start multiple units to segregate their businesses . They say that firms used to start multiple companies in the past but now with several regulations and administrative costs associated with setting up multiple firms it is not such a common practice.

“If you want to keep your operating / holding structure opaque, one may set up multiple companies. For example, you approach regulator A and you want to keep away from regulator B, you would want to have multiple holding companies, or if you don’t want your business life story to be an open book,” said Amod Khare, partner at consultancy firm BMR Advisors. Khare also said that sometimes multiple companies are set up to raise money from banks and financial institutions for specific businesses . He also said that individuals sometimes set up multiple companies hoping to monetize any one of their ideas at a later stage but made it clear that it was not a common practice given the administrative cost of maintaining multiple companies.

Some experts said the move to open multiple firms without any major activity could be aimed at avoiding taxes or could stem from poor financial advice. “There are various reason why people float several companies. Of them, washing black money into white is one reason,” said a chartered accountant who did not wish to be identified . He said it is also a standard practice adopted by companies to float several companies to increase their net worth. The most famous case of a network of companies being used to pump in cash into the system is that of the Purti group controlled by former BJP president Nitin Gadkari.

Investigations carried out by TOI had unearthed almost 100 companies that routed small investments , mostly received as cash deposits, into the Purti group through several layers. Anywhere between Rs 60 crore and Rs 100 crore was invested in Nagpurbased Purti group using multiple companies. Presently, the Income Tax and the Enforcement Directorate are investigating the case.

Gadkari was not alone in making use of multiple companies, many of them with no visible activity , to do such activities.

The Bansal-Singla clan from Chandigarh had almost a dozen companies incorporated starting in the 1990s. According to investigations after the May 3 arrest of Vijay Singla, a nephew and close aide of former Railway minister Pawan Kumar Bansal, and railway board member (staff) Mahesh Kumar, it emerged that Chandigarh’s powerful political clan had floated many of these companies in recent years.