Task force at Damas to recover lost millions

Damas, the regional jewellery giant, has formed a task force to recover more than Dh300 million as part of its financial restructuring.

Damas has stepped up efforts to raise cash by getting out of ventures overseas. Satish Kumar / The National

Damas International, the jeweller, has formed what it calls a cash-recovery task force to recoup more than Dh337 million (US$91.7m) it is owed.

"Several agreements" have been signed to recover payments to Damas, the company, based in Dubai, said yesterday. The money represented Damas' share of proceeds from exiting foreign ventures, said Sanjay Kalsi, the company's chief financial officer.

"There are certain regions we've exited from and we're recovering money there," he said, declining to name the regions.

Damas, once a darling of investors, was forced to restructure its business after $165m of unauthorised transactions were unearthed in 2009. Its former chief executive resigned soon after.

The company is one of the region's largest jewellers, with more than 400 stores.

"We have created a task force to focus on financial recoveries for the company," said Anan Fakhreddin, the current Damas chief executive.

"We have concluded several agreements to recover funds from different sources that were owed to us. This is a positive step in our ongoing restructuring and we are ensuring that we allocate sufficient resources to recover outstanding dues owed to us."

While it remains unclear where that money will come from, the company has stepped up efforts to raise cash by getting out of ventures overseas.

Indian media reported in April that Damas would not go ahead with a government-approved joint venture with the Gitanjali Group to extend the reach of its brand in India, one of the world's hottest gold and jewellery markets.

Even after the deal's cancellation, however, Damas was reported to still be a shareholder in D'damas Jewellery India, a Gitanjali subsidiary.

Damas is one of the biggest and oldest jewellery retailers in the Middle East, with hundreds of stores and a history dating to 1907. After the company sold shares to the public in 2008 and listed on the Nasdaq Dubai, one of its majority owners and its chief exeuctive - Tawhid Abdullah - allegedly continued to treat the company as a private business, syphoning off funds for personal investments and other purposes.

When the unauthorised transactions were discovered in October 2008, Mr Abdullah and his two brothers, Tawfiq and Tamjid, quickly produced a list of assets they planned to sell and agreed to repay the $165m in 18 months. The Dubai Financial Services Authority (DFSA), which regulates companies listed on the Nasdaq Dubai, began an investigation. An accounting firm was hired to look at the company's books.

In March last year, the DFSA fined Damas Dh13.5m over the transactions and dismissed its board. The regulator also banned the Abdullah brothers from serving as directors in Dubai's financial centre for 10 years, ordered them to pay back Dh365m in cash and return 1.94 million grams of gold taken from the company for personal use.

The investigation also revealed that Damas loaned money to a unit of Dubai Holding to buy stock in its initial public offering, a deal that was reported to have been instrumental in raising interest in the listing.

The latest round of attempts to recover money for Damas comes as it continues to try to turn its business around and put the $165m scandal behind it. The unauthorised transactions forced the company to restructure its debts last year, when Mr Fakhreddin was appointed to help to turn things around.

After numerous delays, Damas reached a deal early this year to restructure more than $800m in loans, but was still trying to recover funds from the Abdullah brothers, who were taken on last year as senior advisers despite being fined and dismissed from the board.

In April, Damas extended the deadline for the brothers to repay what they owed. It was also revealed that month they owed an additional Dh1.2 billion to banks, bringing their total dues to both banks and Damas to Dh1.8bn. In May, Damas gave the brothers more time to repay about Dh600m worth of cash and gold.

The company last month reported profits of Dh53.3m for the year to the end of March, reversing a Dh2bn loss in its previous financial year. The Abdullah brothers still owe money to the company, Mr Kalsi said.

"The brothers owe Dh640m to us," Mr Fakhreddin told Gulf Business last month. "The point of the repayment period is that, if you look at the whole portfolio that the brothers have, the fire-selling of these assets is not realistic and will not serve the purpose of anyone."