Osian's Art Fund: The Broken Paddle
o, it was not the money that I valued —what I wanted was to make all this mob of Heintzes, hotel proprietors, and fine ladies of Baden talk about me, recount my story, wonder at me, extol my doings, and worship my winnings.”
–Fyodor Dostoevsky in The Gambler
If the 19th Century Russian author were to live and search for a novel idea today, he could try telling the story of Neville Tuli, who spent 18 years gambling on horses at Ladbrokes in London, returned to his roots in India where he became the best-known spokesman of the country’s art and launched the world’s largest art fund. The story would, of course, turn melancholic, detailing how he fell from glory with the plunge in the art market, struggled to pay his investors and stared at the risk of losing all that
he created.
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Image: Gautam Singh for Forbes India
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NOWHERE TO LOOK: Investors thought Tuli had the vision for the future of Indian art; until he fell short of expectations | |
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One good place to start the plot would be the Mumbai office of ABN Amro Bank. A bank executive pays a visit to the office of Tuli’s Osian’s Connoisseurs of Art (Osian’s) almost every other day to recover money that the firm owes several wealthy clients of the bank who invested in an art fund sponsored by it. The dues are more than Rs. 40 crore. The bank has so far managed to extract some of that money. A lot remains. (ABN Amro declined to discuss the case with Forbes India but said it will review any client complaint and investigate).
Neville Tuli, the flamboyant chairman and managing director of Osian’s, needed about Rs. 115 crore to repay investors in Osian’s Art Fund – Scheme Contemporary 1, when the three-year scheme matured in July 2009. Unfortunately, a global recession froze the art market, landing Osian’s in a liquidity crisis and left the close-ended art fund marooned with unsold inventory and a cash shortage just around that time.
Soon, word spread that Tuli’s art fund wasn’t able to pay off investors at its close. This set off a reaction among the art fraternity, beating down the prices of the works of marquee names such as M.F. Husain and F.N.Souza in the fund’s portfolio. Surely, Tuli has told banks such as ABN Amro and BNP Paribas that referred their clients to the fund that it was only a “delay not default” caused by the art market reversal. But he isn’t getting too many backers to cut the delay.
Bankers, for instance, have rebuffed Tuli’s attempts for a bail-out on the grounds that Osian’s is already over-leveraged and its cash flows have shrunk. “Neville Tuli has come to us several times over the past few months for money. We will not lend him one rupee more,” says a top banker who had lent handsomely to Osian’s in the past.
Tuli had told Forbes India on January 16 that the art holdings of the fund have now been sold and the firm is awaiting payment from buyers. In an email to Forbes India just before this edition went to press Tuli said that out of 656 unit holders in the fund, two batches of 59 unit holders would have been paid by 25 January 2010 (a total of Rs. 15.3 crore), and all others have been paid. Forbes India could not independently confirm this.
Meanwhile, he has also raised money from other sources. He raised over Rs. 9 crore last May by selling shares in his company (the fund’s sponsor) to Reita Gadkari, a London-based investor, at a premium of Rs. 1,240 per Rs. 10 share. He even borrowed money from private financiers at interest rates of up to 30 per cent to meet payments.
As things stand, the financial picture looks bleak. While Osian’s has not yet filed its accounts for the year ended March 2009 with the Registrar of Companies (RoC), Tuli’s email says that as of 31 March 2009, revenues were Rs. 68 crore and the company made a loss of Rs. 19 crore. Its total debt was Rs. 109 crore. Estimates based on due diligence done by KPMG for Dubai-based Abraaj Capital, an investor of Osian’s, reported Osian’s debt as Rs. 133 crore for the same period.
The impact of a bearish art market is only a facet of Osian’s problems. There are several others.
Osian’s most high-profile investor, Abraaj Capital, has filed a suit in London’s commercial court to recover $23.7 million it gave Bregawn Jersey, one of Tuli’s offshore companies, to seed an international venture called the India Asia Arab Art Fund. Meanwhile, Osian’s most ambitious project, Osianama, an art conservatory and pop culture museum, is yet to rise from the flat piece of land in Central Mumbai where the famed Minerva theatre once stood.
Osian’s is going through its worst phase in its nine-year existence. The situation is a far cry from what Tuli had envisaged when he told The Hindu newspaper six years ago, “I have love, passion, motivation, and I want to change things. I want to make materialism serve creativity.”
In due course, many would buy that dream and Neville Tuli would gain a reputation as a magnet for investors.
The list of investors in Osian’s Connoisseurs of Art reads like a roll-call of the art appreciation elite in India: Sanjeev Khandelwal of Khandelwal Laboratories, industrialist Gautam Thapar, Citibanker Pramit Jhaveri, Sheshasayee Properties of Kumar Mangalam Birla, Priya Paul of Apeejay Surendra Group, HCL Corporation Ltd., Roshni Nadar, Gates Foundation’s Ashok Alexander, celebrity cook Tarala Dalal, MphasiS founder Jaithirth Rao, Kamal Morarka of Gannon Dunkerly and Sangita Kathiwada are just some names.
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just think a company who is treating it's employees as it's slave and not paying even salaries or can't even afford to pay salaries to its staff, how come will it pay to it's investors??
