Bengaluru IT market rocked by scams

Bengaluru: Post the scam involving Jupiter IT Solutions, who absconded from the Bengaluru IT market with pending dues amounting to Rs 2-3 crore, now another Bengaluru-based company KS Info Systems has allegedly defaulted on credit payments of around Rs 35 lakh, and Shiva Basavaiah, Proprietor of the company, has absconded. Many dealers in Bengaluru have registered police complaints against Basavaiah. KS Info System has to pay Rs 9 lakh to Iris Computers. The company has secured an arrest warrant against Basavaiah in Delhi. “We had learnt that KS Info Systems was a fly-by-night operator and was staying as a paying guest in Bengaluru. He has defaulted on payments amounting to Rs 9 lakh following which we resolved to take the matter to court. This was an HCL deal and since we had very recently added HCL to our portfolio we were expecting to show good results for the same this quarter. However, post this incident we are going to be even more careful in closing deals with HCL partners,” mentioned Kamini Talwar, Director, Delhi-based Iris Computers.

According to market sources, around six to seven dealers, apart from Jupiter and KS Info Systems, have made credit defaults worth crores of rupees. Meanwhile, dealers who had defaulted on credit payments were given a chance till Dec 6, 2008 and asked to clear their cases to prevent any legal action being taken against them. A source on the condition of anonymity confirmed that around three to four dealers issued cheques worth Rs 1.5 crore to creditors.  “As of now a case has been booked only against Jupiter and KS Info Systems. We will come to know about the other defaults only after sometime. At this point we can't just blame people as it may prove to be wrong if their payments come through,” the source stated.

Last week the Association for IT (AIT), Bengaluru conducted their annual general meeting in which certain decisions pertaining to defaulters were taken. The association has decided to start an e-mail group for its members, where any news or alerts regarding defaulters would be sent across to partners. Jayessh Mehta, President, AIT and MD of Future Businesstech India said, “During our AGM the issue of rising credit defaults was discussed. We have decided that when any dealer's cheque is dishonored we will send a group e-mail to caution other dealers and minimize such occurrences.”

Confirming the default cases, R Sridhar, Secretary of AIT said, “From what we have heard, KS Info System has credit defaults worth Rs 35 lakh in the market. Some of the dealers affected are Tirupati Enterprises, Ecaps, Par Data Systems, Advance Technologies and Kukreja Electronics.”

A source at Triangle Technologies confirmed the fact that the proprietor of KS Info System is       absconding and has an outstanding payment of Rs 3 lakh.

These cases of rising credit defaults has created apprehensions among partners in the market. Confirming that around Rs 77,000 has been held up with KS Info Systems, Sunil Kukreja, CEO, Kukreja Electronics, Bengaluru said that more such cases are rising in the market. “The market is facing a bad situation. Dealers, especially distis and sub-distis, have to be very careful in dealing with partners. We have also become very cautious while dealing with partners,” said Kukreja.

Sanath Babu, CEO, Sri Durga Computech said the phenomenon of rising credit defaults has had a severe impact on the market in Bengaluru. “We don't know who to deal with, as so many cheque bouncing cases are being reported in Bengaluru and Tamil Nadu. Business has really been affected in the state and the scenario here is very bad,” Babu said.

Dinesh Nair, GM, Sogo Group shared that his company has reduced its credit payments to partners. “We have alerted all resellers and now we have reduced our credit payments. We have made sure that we will think twice before closing a deal with a partner,” Nair averred.

Claiming that there are many rumors in the market with regard to defaulters, Durlabh Jain, Director, Devraj Computers, Bengaluru said, “Rumors are doing the rounds in the market on the names of partners who have defaulted on amounts worth crores. This has in fact created chaos in the market. It is also said that a few defaults are paying interest to big disti for fear of any legal action being taken against them. We aren't in a state to accept or deny anything,” Jain claimed.

When contacted, K Jaishankar, MD, Ingram Micro shared, “Fortunately we have not been directly impacted by the default cases. But yes, there has been a delay in payments from partners. Now we are exercising caution when signing on any deal or giving credit.” Officials from Redington were not available for comment on the issue.

(With inputs from NR Sethuraman and Pooja Sharma)