Revision as of 21:19, 3 March 2018

Biographical highlights

Hollywood stars glittered in his gems on red carpet, February 15, 2018: The Times of India

Nirav Modi, biographical highlights
the Punjab National Bank fraud case
From: Hollywood stars glittered in his gems on red carpet, February 15, 2018: The Times of India

His PR Machine Ensured Global Media Adulation

Diamonds always draw attention but it’s rare when the diamantaire seems to shine brighter than the stones he sets.

Despite making a late entry into the retail business in 2010, Nirav Modi quickly gained a reputation as India’s jeweller to the stars as Hollywood A-listers from Kate Winslet and Dakota Johnson to Taraji P Henson walked the red carpet in diamonds from his eponymous brand.

Late last year, Priyanka Chopra was roped in as brand ambassador. By 2013, he had made it to the Forbes’ billionaires list.

The allegations of bank fraud that have emerged against Modi tarnished a brand that had been as carefully crafted as his signature stretchable bracelets. His public relations team made sure he got his share of flattering profiles in the media.

One luxury writer from Los Angeles was clearly floored after Modi closed his entire Delhi store “just for me” so that the journalist could “experience the luxury that most wealthy buyers have”, and drove him to the airport afterwards.

Though Modi, 48, comes from a family of diamond brokers in Antwerp, Belgium, and grew up in the trade, he’s often told journalists that he didn’t plan to join the business. He got into Wharton, studied finance for a year, dropped out and decided to get into diamond trading after all. As a 19-year-old, he was sent to Mumbai to learn the ropes from his maternal uncle Mehul Choksi, chairman of Gitanjali Gems.

In 1999, he set up Firestar Diamond to source rare diamonds, and acquired a string of international companies that helped him build his network and get into contract manufacturing.

Apart from India, it has manufacturing units in Russia, Armenia and South Africa. It was in 2008 that a request from a friend for a rare piece of jewellery got Modi interested in retail.

Modi opened his first flagship boutique in New Delhi’s Defence Colony in 2014; a store in Mumbai’s Kala Ghoda followed the next year. At the glittering opening of his Madison Avenue store in New York in 2015, actors Naomi Watts, Nimrat Kaur and Lisa Haydon, and model Coco Rocha were among the celebrities who showed up. He also has boutiques in London, Singapore, Beijing and Macau.

Last year, he purchased Rhythm House, the iconic Mumbai music shop, for a reported Rs 32 crore with plans to turn it into a retail space.

Modi, who is often described as soft-spoken and unassuming, is reported to have strategically picked up rare diamonds at bargain prices during the slowdown in 2009. The move paid dividends. In November 2010, Christie’s auctioned his Golconda Lotus Necklace with a flawless 12-carat Golconda diamond for over Rs 16 crore—and put it on the cover of its auction catalogue, the first for an Indian jeweller without a 100-year history.

Modi can’t draw, but explains his ideas to his craftspersons, who go back and forth with the designs and prototypes until they match the vision in his head, he’s told the media. For now at least, his vision of building a high-end global brand and taking his company public through an IPO may have to be shelved.

Why Surat traders stopped dealing with Nirav

March 1, 2018: The Times of India

HIGHLIGHTS

Surat traders said the two jewellers had acquired a reputation for not following the industry's unwritten code of business ethics

"That's why many merchants stopped dealing with Gitanjali or Nirav Modi's company long back," said Dinesh Navadiya, ex-president of Surat Diamond Association

Some diamond merchants in India's biggest centre for trading the precious gemstones say they had stopped dealing with Nirav Modi and his uncle Mehul Choksi - two billionaire jewellers accused of PNB fraud - because they were often slow to pay dues.

The financial sector was stunned when Punjab National Bank said in mid-February it was the victim of a $1.77 billion fraud - a figure that has since risen to nearly $2 billion. The second-largest state bank blamed Nirav Modi and Choksi, accusing them of conspiring with bank employees to obtain fraudulent credit overseas. Both deny any involvement.

Nirav Modi, who runs eponymously branded high-end jewellery stores that stretch from New York to Hong Kong, and Choksi, who heads Gitanjali Gems and operates stores under banners including Gili, Nakshatra and Asmi, both belong to the Jain community from Gujarat.

The Jain and Patel communities dominate the diamond cutting and polishing business centred on the Gujarati city of Surat. Traders there who spoke to Reuters said the two jewellers had acquired a reputation for not following the industry's unwritten code of business ethics.

"Nirav Modi and Gitanjali's business model wasn't convincing to us," says Seventilal Shah, chairman of Venus Jewel, who said he had stopped dealing with either business some years ago.

"If they take goods on two months credit, and there is one month's delay it is fine. But if it is regular episodes of delays, then there is something wrong. That was the case with these guys."

Representatives for both Nirav Modi and Mehul Choksi did not respond to multiple requests for comment. Indian authorities say both men left the country in early January and their whereabouts are unknown.

In the tight-knit Jain and Patel gem trading fraternities, where many struggle to get bank credit, most business is done informally, with cash lent and goods advanced without collateral or paperwork.

"Mehul didn't understand the importance of trust," said one Surat-based diamond exporter, who has been in the business for nearly five decades and asked not to be named.

"Once we sold him polished diamonds and we had to chase him for payment almost every month for six months. Every time he used to give some excuse, then we decided to stop doing business with him altogether."

Eight traders in Surat, where roughly 80 per cent of the world's diamonds are cut and polished, complained of similar issues in their dealings with both Nirav Modi and Mehul Choksi.

"That's why many merchants stopped dealing with Gitanjali or Nirav Modi's company long back," said Dinesh Navadiya, former president of Surat Diamond Association, who runs a small diamond business in the city.

Gitanjali, in a stock exchange filing, has denied any involvement in the alleged fraud. Choksi, in an open letter to employees on Feb. 23, protested his innocence but advised them to look for other jobs, as his assets had been seized and he was unable to pay their salaries.

In a letter to Punjab National Bank (PNB), which says it discovered the alleged fraud at one of its Mumbai branches, Nirav Modi disputed the bank's allegations, arguing the sums he owes PNB are far smaller than those outlined by the bank. Nirav Modi's lawyer has also denied the allegations.

Franchise model

Both men have had minor brushes with authorities in the past.

In 2015, Nirav was fined Rs 480 million for exporting and importing the same diamonds through Surat's Special Economic Zone to inflate export numbers, an official with the Directorate of Revenue Intelligence said.

In July 2013 market regulator SEBI had barred Choksi from trading for six months for manipulating Gitanjali's share price.

Neither case drew much attention at the time and both men continued to expand their businesses, tapping Bollywood stars to promote their brands.

Choksi's Gitanjali adopted a franchise model to open new retail stores, but two franchisees who spoke to Reuters said it failed to deliver on promises made.

Hari Prasad said he invested roughly Rs 100 million ($1.5 million) to set up a Gitanjali store in Bengaluru in 2012. Gitanjali promised to manage operations including inventory, staff recruitment, salaries, rent and electricity bills, he said.

But he alleges Gitanjali charged him inflated prices for old or inferior stock he could not sell for a profit, and he closed the store in 2014.

Choksi and officials of Gitanjali Gems were not reachable for comment.

In 2016, Prasad and six other franchisees jointly wrote a letter to Prime Minister Narendra Modi's office accusing Choksi of fraud.

The prime minister's office (PMO) forwarded his complaint to the Registrar of Companies, which closed the case, said Prasad, who showed Reuters copies of the correspondence.

The PMO and the Registrar of Companies did not respond to requests for comment.

"I had to believe him (Choksi) as he was managing director and chairman of such a big group, which is publicly-listed and has a brand image," said Prasad. "If you go to do business with such types of people, you will believe them."