Maika Holdings Berhad, which was established a quarter of century ago in 1982 to allow the Indian community in Malaysia to take a share in the country’s economic development, has been a disaster from the beginning. The company was launched with much hope and hype by MIC (one of the component parties within the ruling government) president Samy Vellu to assist the Indian community and had attracted an estimated RM106 million from 66,400 shareholders – many of whom are estate workers who had pawned their family jewellery and withdrew their life savings to invest in the company.
The largest individual shareholder with almost 2.8 million shares was MIC president Samy Vellu. It was said that the amount invested in Maika was even larger than that obtained by the MCA’s Multi-Purpose Holdings when the company commenced business.
The Scandal
Maika Holdings has periodically been in the news over the years, such as over transactions like the sale of Tumbuk Estate in near Sepang and re-channelling of 9 million Telekom Malaysia Berhad (KLSE: TM, stock-code 4863) shares and almost all of the 10 million Tenaga Nasional Berhad (KLSE: TENAGA, stock-code 5347) allocated for sale to the Indian Malaysian community as part of equity distribution.
In the Maika-Telekom scandal in 1992, it was disclosed by newspapers and magazine that instead of 10 million Telekom shares, Samy Vellu actually advised against allocating all the shares to Maika. Instead Samy Vellu was reportedly said Maika should deserved only 1 million shares while the remaining 9 million shares allocated to “other MIC bodies”.
It was alleged that Samy Vellu’s son and brother-in-law were directors of of the RM2 companies, SB Management Services Sdn Bhd and Advance Personal Computers Sdn Bhd. which received three million shares each. The third company that received the remaining three million shares was Clearway Sdn Bhd. Over the years, those who sought to find the answers and clarifications regarding Maika at MIC meetings were either threatened or beaten up.
Maika’s Cash-Cow Sale – Puzzling
Earlier, many members felt that the board deliberately selected the date (the same day as the 50th Independence Day celebration) to prevent many shareholders from attending the important AGM, not to mention the choice of venue (Sime Darby Convention Centre in Mont Kiara) which is “located too far from the city centre” and could therefore deter shareholders from attending the meeting.
At the company’s 24th AGM on 31st Aug 2007, its shareholders passed five resolutions including the sale of its 74.17% stake in insurer Oriental Capital Assurance Bhd (OCAB) to Salcon Bhd for RM129.81 million and the distribution of surplus to shareholders as a result of disposal of the entire assets in the company, but not before some ugly and untowards incidents.
Maika posted a net loss after taxation of RM9.03 million for the year ended Dec 31, 2006 due to the provision made in OCAB of RM13.9 million in bad and doubtful debts, leading to the insurer making a net loss of RM9.33 million. Until last year OCAB was the only money-making subsidiary within Maika, which includes tens of inactive or debt-making companies. Rumor was spreading that kickbacks were involved in selling the insurance company to Salcon (headed by former Malaysian envoy to the United Nations Razali Ismail), not that you can ignore the rumor altogether considering that OCAB suddenly was in heavy debts after years of profit.
Interestingly Salcon Berhad (KLSE: SALCON, stock-code 8567) is a company dealing in maintenance of water treatment and severage treatment plants, so it’s a mystery why Salcon would buy an insurance company, not to mention it does not have the expertise in running the insurance business. However the puzzle could be due to the fact that Razali have been offered lucrative road construction jobs in India in deals brokered by Samy Vellu, who is also the Malaysia Works Minister.
AGM – All Hell Breaks Loose
During the 24th AGM, there were numerous verbal exchanges between rival groups believed to be representing MIC president Datuk Seri S. Samy Vellu and his former deputy, Datuk S. Subramaniam. At one point, Subramaniam was shoved by detractors who wanted him to stop asking questions. There were also near-scuffles and heated arguments between members of the groups as tempers rose.
Shareholder Dr A. Letchumanan claimed he was pushed, kicked and thrown out of the meeting. Lawyer G. Rajasingam later said it was ludicrous that some shareholders were manhandled and thrown out of the meeting. “Some men behaved like thugs, dragging people out. This is not at all like a shareholders’ meeting,” he said.
R. Rajannan, a representative of Koperasi Nesa Pelbagai Berhad, a company which has 625,000 shares in Maika Holdings, said he was threatened and had curry powder thrown at him. It is understood that an elderly man was left bleeding after being assaulted during the meeting attended by about 1,500 people.
Howev
er Maika CEO Vell Paari (Samy Vellu’s eldest son) told TV news that he wasn’t aware of anyone being asked to leave the hall, or of anyone being pushed around, or of anyone bleeding. Samy Vellu is the longest serving president of MIC (Malaysian Indian Congress) who held the position since 1979 till current day.
“We are hoping to give back one-to-one because they (the shareholders) invested a RM1 (per share). We plan to buy the mother shares for RM1 (per share) and we have given 25 million in bonus shares, which will also be bought back at RM1 (per share) … We want to give the shareholders the option to do what they want. They can take their money back or opt to continue with the company” Maika’s CEO Vell Paari told reporters after the AGM.
The End of Maika’s Myth
Whatever the reason behind the demise of Maika now (you don’t think it can survives without any profitable business entity, do you?), it only goes to show again that politic and business should not be mix together as its’ near to impossible to practice good corporate management, governance and transparency in order to create value to shareholders. The fact that Maika couldn’t list itself even during the profitable stage only goes to show how “messy” the accounting figures were. Anyway luckily Maika was so badly managed that it didn’t manage to sucks more of other public’s money into investing its stock.
It’s definitely sad to witness the hard-earned savings of the poors being ripped off and is now on the verge of bankruptcy after 25-years of mismanagement. Worst still, the poors are still holding the worthless pieces of paper once were their hopes – only ended up in debt to repay loans taken to buy Maika shares. Based on the last closing share price of Telekom Malaysia of RM9.75, the 10 million shares allocated could worth a whopping RM97.50 million, not to mention the huge returns that the shareholders could enjoy from the dividends declared over the last 25 years.
Even if you put those initial RM106 million into fixed-deposit, the shareholders would be jumping in joy to learn that after 25-years of the pathetic average 3 percent compound annual returns, the balance sheet will shows a mind-boggling RM221.94 million in the account balance as of 2007. You don’t have to be an investor-god like Warren Buffett to realize that you’re at least making more than 100 percent profit by doing so (fix-deposit).
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September 2nd, 2007 by financetwitter
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hey, that photo with a bledding man must be a fake if you believe what Vell Paari said.
by the way, I thought the venerable Samy Vellu has promised investor in Maika RM1.30 for every one share. deadline must have been long gone. reassurance for you investors again. Samy will promise you again on April 1, 2008..RM1.30 for every share..but just wait, ok.