Falkon industries debenture promising 18.6 percent guranteed return, is it a fraud?

POSTED BY Chandan Kumar ON November 20, 2012 11:07 am COMMENTS (3)

Investment agents in rural areas of Bihar are offering an investment plan in Falkon induestries in which company is promising 10 times return in 13 and half years. One agent showed me me details of an already issued debenture of Falkon industries in which company has issued 400 units for 40,000 rupees whise redemption value is 4,00,000 rupees after 13 years and 6 months. If I calculate the return on investment, then it comes out to be nearly 18.6%. I searched on net about the company but other than a very basic website (http://www.falkonpariwar.com/), I could not find anything else. It is a fraud company?

The company claims to have businees in FMCG, Real Estate and many other sector while it was formed just 3 years ago. Can you please suggest whether it is safe to invest in this company?

Thanks,

Chandan

3 replies on this article “Falkon industries debenture promising 18.6 percent guranteed return, is it a fraud?”

  1. BanyanFA says:

    Chandan,
    I won’t term any thing as fraud. It is greed factor combined with risk return ratio. The questions which you need to ask are :
    1. Why would a company offer interest on deposits at around 18% when the prevailing FD rates are around 9%.
    2. There would be certainly a factor of very poor credibility which is preventing the company to raise funds from the banking sector even at 18% which is forcing it to go to the markets via Debenture issue.

    And if you are happy to take that risk – then it is your risk appetite and not the fraudulent intentions of the borrower. Point to note is that while analysing the companies’ ability to service 18% debt, you need to look into their way / potential of earning min 18% return !

  2. At the end of the day, This kind of return is too tough to deliver and should be avoided. even if its a registered company , still the default can happen and especially for such a long term of 13 yrs, I do not want to believe in this kind of investment avenue !

    Manish

  3. TheZionView says:

    If its too good to be true it almost never is.

    Even if the company is genuine 18.6% over 13 years period is difficult to achieve. To get this company shuld atleast grow its ROE at 20%+ just to pay you back. There are few company that grows 20%+ but even they cant gurantee it for period of 13 years.

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