NRI Investors sue ICICI Ventures for $103 million in damages
Moneylife Digital Team 29 October 2014

Investors claim that investments made by ICICI Ventures in real estate projects caused huge losses, for which the investors are seeking damages


69 NRI investors, who had invested in ICICI Ventures' India Dynamic Fund III, have sued 'ICICI and associated companies' to the Mauritius Supreme Court. The suit is regarding losses suffered as a result of investments in real estate.


“A plaint with summons was lodged before the Supreme Court of Mauritius by a group of NRI and foreign investors against (DIF III), International Financial Services Ltd (IFS), ICICI Venture Funds Management Company Ltd (ICICI Venture), ICICI Bank and the Western India Trustee And Executor Co Ltd,” the legal firm handling the case, Banymandhup Boolell Chambers said.


These 69 investors are part of a larger group of 500 investors in the fund. The investors allege that the fund, promoted by ICICI Ventures and ICICI Bank, did not invest in world class projects as promised, but instead invested in projects that flopped miserably.


Calling the allegations baseless and pointing out that only 69 out of 500 investors are party to the suit, an ICICI spokesperson said, “It is common knowledge that globally PE as an asset class does not guarantee returns given the equity risks involved. Also, projects in real estate have a long gestation period and hence the returns accrue over a period of time.”


However, pointing to the fact that of the 13 projects invested in, 5 projects (2 in Mumbai and 3 in Hyderabad) took up 60% of the corpus, the investors said that this went against ICICI's original promise of diversifying the investments. The investors also alleged that as per the fund's March 2014 report, only one project in Pune had been exited, while the rest were in various stages of construction, with a Chennai project yet to begin.


The petitioners said that, “Thus, it is a classic case of total neglect of due diligence, research of suitability taking into account of exit term, outrageous underestimation of cost and completion, alleged negligence and overt manipulation of the finances for escalating costs and serious blunders in judgment of selection of projects.”


In its defence, ICICI through its spokesperson added, “ICICI Ventures has extended the fund’s life by three years to optimise the realizations from the portfolio. ICICI Ventures also simultaneously offered investors a cash exit option in line with global best practices.”


The investors are claiming a sum of USD 103,699,976, which is the capital investment made by the investors in DIF III and the moral damages.

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