WITTY GROUP TERMINATES ITS INVESTMENT DEAL WITH CERESTRA OWING TO CERESTRA’S DEFAULT IN INFUSING THE COMMITTED EQUITY EVEN AFTER FOUR YEARS

admin April 1, 2021April 1, 2021 0 Comments

Cerestra Infrastructure Trust, an equity fund much into the limelight since the last
few years for acquiring school assets has defaulted in its commitment to infuse
equity in a structured sale and lease back transaction with the Witty Group of
Institutions.
Commenting on the development, Dr. Vinay Jain, Promoter of Witty Group of
Institutions informed that Cerestra had approached them in the Year 2016 with a
proposal to infuse equity by buying 51% stake in their school real estate via a
structured sale and lease back deal. Cerestra failed to infuse the committed
equity even after four years of the deal and thus defaulted in its obligations
forcing the Witty Group Promoters to cancel all transaction documents and the
lease obligations and raise a claim against Cerestra for buy back of their 51%
shares sold to Cerestra.

“Our lawyers are aggressively working on filing our claim for buy back of shares,
illegally holding control of the school real estate company and against the eviction
notice served by them to us. Cerestra has illegally served property eviction notices
to us with an intention to pressurize us and the same shall be appropriately
challenged and set aside. These private equity firms lure and coax struggling and
ambitious school promoters with rosy offers and then entangle them into signing
a series of one sided documents with an intention to grab their properties and
businesses. School promoters should be very careful while getting into any deal
with such fraudulent equity players”, commented Dr. Jain.

COMPLAINT FILED AGAINST CERESTRA WITH SEBI

Mumbai based Witty Group of Institutions has filed a complaint against Cerestra
Infrastructure Trust with SEBI and RBI for Criminal Breach of Trust, Default, Fraud
and Cheating and has demanded an in-depth enquiry into various transactions
executed by Cerestra in various school assets.
The Promoter of Witty Group, Dr. Vinay Jain has alleged that Cerestra
misrepresented them and signed various transaction documents to infuse equity
into their school real estate at Malad against rental income via a structure sale
and lease back arrangement. However, by their own admission, it is now learnt
that Cerestra did not have any SEBI permission to infuse the committed equity
and hence defaulted in making the committed equity infusion. Cerestra admitted
that they could not raise funds and hence according to SEBI guidelines could not
invest in Witty as per their commitment in various transaction documents. Witty
Group cancelled its deal with Cerestra in December 2020 and has taken legal
recourse to claim back its 51% stake sold to Cerestra in its real estate company.

SEBI & EDUCATION MINISTRY MUST INVESTIGATE ALL THE DEALS DONE BY
CERESTRA INFRASTRUCTURE FUND AMIDST COMPLAINTS OF CHEATING BY
SCHOOL OWNERS

There is an immediate need to put a check and curb the sale and lease back
model marketed by some education infrastructure funds. In these COVID times,
almost all schools are financially stressed and these funds are precariously
floating offers to schools to acquire their school building assets and businesses at
throw away prices. School owners are being lured and coaxed into selling their
schools at throw away prices so that these funds may later list their assets via the
REIT model against hefty premiums.
This is indeed a very harmful model. Schools are built out of passion and it takes
years of hard work and perseverance in establishing any good school. Amidst
financial crisis or cash shortfall during the initial years, schools fall prey to the
dubious hidden intentions these funds have.

In a recent development, Mumbai based Witty Group of Institutions has
terminated all its sale and lease back deals with Cerestra Infrastructure Fund for
its Malad and Udaipur Schools. Cerestra had committed to infuse equity into their
school real estate company and in turn were supposed to receive lease rentals
against their investments. However, Cerestra defaulted in its commitments and
could not raise funds for equity infusion even after four years of the deal forcing
Witty promoters to call off their deal with Cerestra. It is also alleged that Cerestra
has been luring Witty Group to sell their other school assets as well. However,
Witty Group kept denying their offers as Cerestra could not fulfill its financial
obligations of earlier deals also. It is also interesting to note that Cerestra has
recently launched its own School Management Company under the name
CRIMSON and is now looking to take over management of various schools.
Dr. Vinay Jain, promoter Witty Group commented that one should be very careful
while dealing with these funds. Cerestra lured us with their equity infusion offer.
These funds approach with an offer to buy 51% controlling stake in the asset
company. Once the deal is signed, they further approach the schools to allow
them to borrow money from banks on the very same school asset. They borrow
money on lesser interest rates from the bank on the school property and then
give the same money to schools at higher rental returns and that too with school
personal and corporate guarantees. School promoters get trapped in a very tricky
way. Based on the representations, undertakings and warranties given to us by
Cerestra, we transferred 51% equity to Cerestra and fulfilled our obligations.
However, Cerestra always had a cheating mindset and they kept delaying the
committed equity infusion for a long four years forcing us to finally call off our
deal with them. The hidden agenda is to initially acquire control over the school
asset company and then slowly pressurize and take over the management of the
schools. Sebi, Education Ministry must seriously investigate all deals done by
Cerestra, affirmed Dr. Jain.