King­dom Gone

Business Today - - FROM THE EDITOR -

OVER THE NEXT few years, a num­ber of en­trepreneurs, who had shot to promi­nence over the past decade and a half, will ei­ther have lost their en­tire busi­nesses or will see their em­pires shrink dra­mat­i­cally in size, af­ter los­ing many of their com­pa­nies. They will see their prized pos­ses­sions ei­ther auc­tioned off or liq­ui­dated un­der the In­sol­vency and Bank­ruptcy Code. Their ag­grieved lenders, with a lit­tle bit of prod­ding from the Re­serve Bank of In­dia (RBI), would have al­ready taken them to the Na­tional Com­pa­nies Law Tri­bunal (NCLT) for bank­ruptcy pro­ceed­ings. For many ty­coons, the process is al­ready un­der way. Some oth­ers may see their firms go­ing to the NCLT soon, un­less they find the money to re­pay the banks.

Thus the Ruias of Es­sar will lose their flag­ship Es­sar Steel, and pos­si­bly sev­eral other power and port as­sets. In a bid to save their steel busi­ness, the fam­ily had al­ready sold off plenty of as­sets, in­clud­ing a re­fin­ery, its cap­tive power plant, a port, and also in­ter­ests in BPO and tele­com busi­nesses. None of that helped, and pretty soon, the Ruias who had built an em­pire that was in the top 5 busi­ness groups in In­dia by rev­enues will have shrunk to one-third of their size.

They won’t be the only ones – the Dhoots of Video­con are likely to lose their flag­ship con­sumer durables em­pire, which is what they are best known for. Sev­eral steel ty­coons – like the Sin­gal broth­ers of Bhushan, San­deep Ja­jo­dia of Mon­net Is­pat (who hap­pens to be the brother-in-law of Sa­j­jan and Naveen Jin­dal), Umang Ke­jri­wal of Elec­tros­teel Steels, and Ra­jin­der Miglani of Ut­tam Galva – will be left with lit­tle, if any­thing. The Gaurs of Jaypee group who had built power, real es­tate, ce­ment and in­fras­truc­ture as­sets and held huge land banks, will also have shrunk to a frac­tion of their size.

And th­ese are only some of the names. Over the next cou­ple of years, many oth­ers, par­tic­u­larly those who had bet heav­ily on in­fras­truc­ture, will be re­ferred to the NCLT un­less they find new sources of fi­nanc­ing, or turn their com­pa­nies around quickly.

So, what went wrong with th­ese busi­ness­men? Their am­bi­tious plans were mostly drawn up dur­ing the go-go years of the In­dian (and global) econ­omy be­tween 2004 and 2008, when no goal seemed im­pos­si­ble. They were ad­dicted to cheap debt. Most could not com­plete their projects in time – some be­cause they mis­cal­cu­lated, oth­ers be­cause of pol­icy changes be­yond their con­trol, and still oth­ers be­cause they di­verted the money into dif­fer­ent busi­nesses. The banks, too, can share part of the blame – they of­ten gave fresh loans even when it was ap­par­ent the com­pany was in trou­ble – un­til the RBI and the gov­ern­ment got strict on bad loans.

Se­nior Edi­tor Nevin John looks at the rise and fall of the most prom­i­nent names in our cover story this is­sue.

@Pro­saicView

pros­en­jit.datta@in­to­day.com

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