‘Pudiya Ghumao’: How the diamond industry uses bogus trading to inflate balance sheets

(livemint.com) – Nirav Modi is most likely to have indulged in round-tripping of diamond consignments to artificially inflate his balance sheet for raising loans. In Mumbai’s diamond trading circles, pudiya ghumao (which literally means “pass the packet”), the colloquial term for round-tripping of diamond consignments from one market to another, ostensibly to artificially inflate company balance sheets, isn’t exactly a secret. While the finer details of the Nirav Modi case are expected to be known in due course, several people with knowledge of the matter whom Mint spoke to, said that the alleged fraud came to light only after Modi failed to secure fresh loans to service his existing debt. According to the people cited above, Modi had been trying to raise money for more than two years and had repeatedly approached several private equity funds, offering to sell a controlling stake in the company, and was also considering an initial public offering, but remained unsuccessful.