On Saturday, contraceptives maker Cupid Ltd informed stock exchanges that it has withdrawn its plan to invest in Tourism Finance Corp., a company which offers finance to hotels and tour operators. Halwasiya is the biggest shareholder of both companies. Interestingly, when Tourism Finance Corp. had put the fund-raising plan to vote, Oriental Insurance Company, one of its three promoters with a 0.97% stake, had rejected the plan in a rare dissent. Nonetheless, the resolution was approved by over 95% of shareholders, according to voting disclosures reviewed by Mint.

The story begins in September 2023 when Aditya Halwasiya and Halwasiya group company Columbia Petro Chem acquired Cupid, buying a 42% promoter stake for ₹160 crore, and becoming its biggest shareholder. On 20 February, Aditya Halwasiya acquired 13.06% stake in Tourism Finance Corp. for ₹250 crore, becoming its single-largest shareholder. Within a week, Tourism Finance said it plans to raise ₹200 crore from three entities—Cupid, whose biggest shareholder is Halwasiya; Columbia Petro Chem Pvt. Ltd, and Halwasiya himself —by issuing warrants.

Halwasiya agreed to invest ₹50 crore, while Columbia Petro Chem Pvt. Ltd and Cupid would bring in ₹100 and ₹50 crore, respectively. After conversion of warrants, Halwasiya, Columbia Petro Chem and Cupid would have owned 14.13%, 4.48% and 2.24%, respectively. Put simply, Halwasiya and the companies where his family is the biggest shareholder, stood to own 20.85% of Tourism Finance Corp post-completion of warrants.

While Cupid had a market capitalization of ₹2,867 crore as of Friday, Tourism Finance Corp. was valued at ₹1,563 crore.

Columbia Petro Chem is the flagship company of Universal Halwasiya Group, a six-decade-old Kolkata-based business group founded by Madan Mohan Halwasiya. Madan Mohan Halwasiya’s grandson, Ajay Halwasiya, is one of the shareholders of Three Musketeers Hospitality, a Dubai-based hospitality firm. The two other co-founders are Hari Tibrewala and Surendra Bagri; their companies Zenith Multi Trading DMCC and JE Impex DMCC, are among the 13 entities whose assets were seized by the Enforcement Directorate earlier this month.

Emails and messages sent to Sethurathnam Ravi, chairman of Tourism Finance Corp. and who also served as the chair of BSE between November 2017 and February 2019, on why a promoter entity opposed the ₹200 crore preferential share issue and the road ahead, considering Cupid has walked away, went unanswered.

“Cupid walking out will have no bearing on our preferential share issue and we’ll still go ahead with it,” an executive of Tourism Finance Corp said on the condition of anonymity, adding the company’s capital adequacy ratio of over 60% is very healthy.

“Every shareholder has the right to vote as it deems fit and we respect the shareholder’s decision,” said the executive when asked why Oriental Insurance rejected Tourism Finance Corp’s decision to issue shares on a preferential basis.

Aditya Halwasiya denied that Cupid was planning to invest any money it raised in a recent preferential issue in Tourism Finance Corp.

“The ₹385 crore preferential allotment at Cupid Ltd (of which over ₹96 crore has come as the first tranche from the Cupid allottees) is in no way linked to the preferential allotment of ₹50 crore at TFCIL,” Aditya Halwasiya said in an email response. “The ₹385 crore is to be utilized for core Cupid Ltd business development and expansion. ₹50 crore that were assigned for TFCIL was already available as cash/investments with Cupid.”

“The change of mind has come about after a lot of deliberation and is a strategic decision to ensure we utilize capital where it is most value-accretive for Cupid,” Halwasiya added.

But some market experts remain unconvinced.

“One of the reasons why Cupid decided to walk away from the preferential share issue of Tourism Finance Corp., which was not a good decision because they were investing in unrelated business, could be that the spotlight is on them over the promoters’ ties with Hari Tibrewala,” said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research.

Lack of clarity about the source of funds of some investors seems to have thrown the entire SME market into mayhem, Subramanian added.

“A promoter like Aditya Halwasiya investing money along with the money of his company, Cupid, to buy shares of a company in an unrelated business (Tourism Finance Corp) is poor corporate governance. Especially when Cupid itself raised money from investors,” said Nitin Mangal, a Mumbai-based Sebi-registered independent analyst.

Aditya Halwasiya, 29, became Cupid’s managing director last year, while his elder brother Ajay Halwasiya joined as an additional director in February. Ajay Halwasiya is also managing director of Three Musketeers Hospitality.

“I, Aditya my family and business entities have received no communication from any statutory or investigative body regarding their investigation into Hari Tibrewala,” said Ajay Halwasiya in response to a questionnaire.

“I believe in the business potential of TFCIL and would like to see the business get to the next level. We will look at what is best for all stakeholders across the board and will take a focused decision on this front as well,” said Aditya. “Like Cupid Ltd, I see a great launchpad for TFCIL”.