MAIKA Holdings Bhd's current state belies its euphoric start. Many, a lot of them rural folk, were swept away by the fancy promises of future profits by its promoters and the fact that their hard-earned monies, ploughed in to buy Maika shares, would turn them into stakeholders of the national economy.
For many working-class Indians, it was not solely the promise of wealth but the belief that this was the start of the walls of economic barriers being pulled down to raise the status of the community. Some called it a "certificate of pride". On hindsight, this would turn out to be highly naive.
But there were also many urban Indians who were smitten by the idea of investing for decent returns and scooped up Maika shares; some of them have sold their shares over the years as the realisation crept in that chances of reaping returns were thinning out.
Maika was set up in 1983 as the MIC's investment arm, to shore up the corporate equity of the Indian community from a paltry 1% to an ambitious 7%. It is the brainchild of long-serving MIC chief Datuk Seri S. Samy Vellu.
With that main agenda, the drum roll befitting a major festival began in 1984, with the intention to court thousands of Indians to subscribe for the restricted public issue of 50 million Maika shares at RM1 a piece, which was raised to 100 million shares due to the overwhelming response.
The picture of hopeful crowds which thronged the branches of United Asian Bank back then stands in start contrast to that of frustrated shareholders at highly-strung Maika AGMs caught up in fist fights and angry words under the hawk eye of hundreds of security personnel years later.
Many had pawned their jewellery and other valuable possessions and borrowed, undeterred by the then high interest rate regime, which resulted in a two-fold oversubscription for the shares.
One of them is management consultant S. Nadarajah, who was then 25 years old and employed as a clerk in a Chinese firm. He borrowed to buy 1,000 shares which, as a result of a four-for-one bonus issue, today has grown to 1,250 shares. Much to the chagrin of his mother, who was somewhat sceptical, his father too went ahead and borrowed to buy another 1,000 Maika shares.
"I was socially conscious. I didn't just invest for returns. I deeply believed that it would help the Indians who were under-performing in terms of job opportunities and economic development. I had hoped the company would flourish," says Nadarajah.
And it did for a bit. It was reported that in the first financial year, Maika made a pre-tax profit of RM2.17mil. Maika's first chairman Tan Sri G.K. Rama Iyer, the former secretary-general of the Primary Industries Ministry, was appointed in 1985. Dividends of between 3% and 8% were paid in 1985, 1986,1988, 1991 and from 1993 to 1995. There was also a bonus issue in 1996.
Sadly, it didn't take too long for sentimental expectations to match reality. As a business concern, Maika was not flourishing. In fact, it was anything but. The company was besieged by operational losses as a result of questionable ventures and when it did make operative profits, they were at best unimpressive. The seeds of discontent and upheaval was beginning to sow in the community.
The cracks started showing in 1987 and many attributed this to its overzealous expansion into a smorgasbord of businesses including commodities, petrol service station, cattle rearing, aquaculture, fruit farming, chopstick manufacturing and soft drinks.
According to news reports, the group suffered losses of RM532,025 in 1987, RM521,811 in 1988, RM3.09mil in 1989 and RM4.69mil in 1990.
At its peak, Maika had some 18 subsidiaries, most of which were inactive or loss making, with the exception of Oriental Capital Assurance Bhd. One of its memorable ventures include the acquisition of Anthonian bookstore, which further contributed to the losses.
It also made profits from the "sale of investments'' which usually involved government-allotted blue chip shares such as Telekom Malaysia Bhd, TV3 and Tenaga Nasional Bhd, proceeds of which were used to write off debts and losses.
Many opined that Maika should not have been so hasty to sell those shares as in current times, those shares could be worth a handsome sum.
In the mid-80s, it acquired 386ha of the Tumbuk oil palm estate for RM13mil from the National Land Finance Co-operative Society (NLFCS).
Of the countless many subsidiaries it had formed, only one appeared to be a prized asset - one of the earliest insurers in the country Oriental Capital Assurance Bhd (OCA, formerly known as United Oriental Assurance Sdn Bhd).
Following a directive from Bank Negara that all insurance companies need to shore up their paid-up capital to RM100mil by end-June 2001, OCA proposed a rights and bonus issue. Maika's share of the rights issue totalling 31.5 million shares at RM1 each was part-financed by a syariah facility of RM28.3mil from the former Southern Bank Bhd (now part of CIMB Bank Bhd) at an interest rate of between 8.5% and 9% per annum. The loan was taken on a
short-term basis with the understanding that the insurance company would be listed on Bursa Malaysia. That, however, had failed to materialise. As at Aug 15, 2007, the outstanding loan obligations of Maika to CIMB and Danaharta Managers Sdn Bhd totalled some RM55.6mil including interest. Those debts remain outstanding till today.
By 2000, creditors were knocking on its doors demanding repayments. To fully settle a revolving credit facility of RM23mil which was demanded, the company disposed of 755 acres for RM38mil cash in 2005. According to Maika's annual report 2006, some RM10mil of the proceeds were also used to part-settle the syariah facility which expired at end-September 2006; the principal amount outstanding was RM18.3mil which matured in September 2007.
But that was not all. In 2000, it was stated in the company's 2006 annual report that Danaharta Managers demanded full repayment of a debt of RM23mil which was classified as non-performing and which ballooned to RM34mil as at 2006 due to a default in guarantee obligations and interest accrued. A small portion of that debt has been settled through foreclosure of assets. Maika has managed to stave them off on the premise that it would restructure itself by selling its Tumbuk estate, investment assets and through a cash call via a rights issue. In the event the financial restructuring fails to materialise, the company and its affected subsidiaries may be required to cease being in business, it had said in the annual report. However, it added that its stake in OCA, if disposed, would be able to fully satisfy the debts and raise additional funds for suitable business opportunities.
Till today, these issues remain outstanding
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