India’s Fallen Billionaires

HOW A DOZEN LEADING INDIAN BUSINESSMEN LOST THEIR CROWN JEWELS TO UNSUSTAINABLE DEBT

In the second week of March, Venugopal Dhoot, 69, who built India’s first homegrown consumer durables company, Videocon Industries Ltd (VIL), looked distraught while walking out of a PMLA (Prevention of Money Laundering Act) court in Mumbai. The court granted him bail but asked him to surrender his passport.

Dhoot, whose personal wealth was $1 billion-plus in 2015, has lost all major businesses — consumer durables, telecom, oil exploration — to insolvency. In August 2019, the National Company Law Tribunal (NCLT) consolidated resolution processes for all 13 group companies, which had total admitted claims of `64,838 crore. In October 2020, the Dhoot family offered lenders `30,000 crore to withdraw the insolvency proceedings. But the creditors decided to sell the assets to a Vedanta group company, Twin Star Technologies, for `2,962 crore, taking a haircut of over 95 per cent. However, the National Company Law Appellate Tribunal (NCLAT) stayed the bid.

Dhoot is among the hundreds of Indian businessmen who have lost their companies after the introduction of the Insolvency and Bankruptcy Code (IBC) in 2016. The code replaced complex corporate insolvency laws and mandated strict resolution timelines. Lenders have so far taken over 4,300 companies to NCLT for loan default.

While high-cost expansion funded by debt has been the biggest reason for most of these corporate failures, another factor has been diversification into unrelated areas. A study of the reasons for their collapse offers lessons in corporate governance, the biggest being that adding capacity at the right time, ability to sense market dynamics and understanding technology are important for running a successful business. And, while debt is important for growth, it has to be watched carefully lest it become unsustainable.

Take Brij Bhushan Singal’s sons, Sanjay and Neeraj, who ran Bhushan Steel (BSL) and Bhushan Power and Steel (BPSL) separately. Both have lost around `55,000 crore wealth. The two companies were part of the Reserve Bank of India’s (RBI’s) first list of 12 big defaulters that were sent to IBC after their debt became unmanageable. Tata Steel acquired BSL for `35,200 crore in 2018 while JSW Steel took over BPSL for `19,350 crore in March 2021. The siblings are being investigated for money laundering and fraud too.

Anil Ambani, the world’s sixth-richest person in 2008 with wealth of $42 billion, pleaded bankruptcy before a London court in September 2020. He lost the flagship Reliance Communications Ltd (RCom) and Reliance Naval and Engineering. Four other companies — Reliance Infrastructure, Reliance Power, Reliance Capital and Reliance Home Finance — had defaulted on loans before the Covid-19 outbreak but got relief for some time as the pandemic forced the government to suspend IBC until March 2021.

BT takes a close look at the dozen biggest business families that have lost most of their wealth/businesses or flagship companies since the IBC was implemented.

Reliance Group: Heavy Damage

Anil Ambani, the younger son of Dhirubhai Ambani, was known for living a luxurious life — appearing with celebrities, hobnobbing with top politicians and travelling on private jets. In 2007/08, when elder brother Mukesh Ambani gifted wife Nita a corporate jet worth `250 crore, Anil bought a super luxury yacht for wife Tina for `400 crore.

That was then. In September 2020, appearing virtually before the High

Court in London in a debt repayment case, he declared he owned no significant assets and his expenses were borne by wife Tina and his family. When the court asked him to declare personal assets and credit card details, he said he had sold all his jewellery to pay legal fees. He tried to convince the court that he leads a simple life, drives one car and owes money to his family. Earlier, in May 2020, the court had ruled in favour of the appellants — three Chinese banks which had lent to RCom — but Ambani failed to pay the $716 million that RCom had reportedly taken on the basis of his personal guarantee. The banks are trying to take possession of Ambani’s overseas assets.

That is not all. State Bank of India (SBI) has also initiated personal bankruptcy proceedings against Anil Ambani. In August 2020, the Delhi High Court stayed the resolution process initiated in the NCLT. The Supreme Court later refused to vacate the stay. Ambani requested the Delhi High Court to include Chinese banks in his legal challenge to SBI’s proceedings in India.

The seeds of the crisis lie in the group’s debt-raising spree to build capital intensive projects in power, defence and infrastructure sectors. The group debt more than trebled from `41,892 crore in March 2008 to `1.61 lakh crore in March 2018. The once flagship telecom business, RCom, also heavily indebted, faced a major disruption when Mukesh Ambani’s Reliance Industries launched free voice and low-cost data services under the Jio brand in September 2016. RCom tried to sell some assets but defaulted on debt in 2019. It was taken to IBC. The shares, which had peaked at around `800 in March 2006, fell below `1 in 2019. Reliance Naval and Engineering also failed to service loans and filed for bankruptcy. Reliance Home Finance and Reliance Commercial Finance, subsidiaries of Reliance Capital, too, defaulted on loans. Banks started the debt resolution exercise for both companies as per the Reserve Bank of India’s June 7, 2019, circular on Prudential Framework for Resolution of Stressed Assets Directions 2019. These companies will get new owners soon. Cash-strapped Reliance Capital defaulted on term loans of HDFC Ltd and Axis Bank on October 31, 2020. Reliance Capital’s total debt was `26,906 crore in March 2020.

The group has two more businesses, Reliance Power and Reliance Infrastructure. In mid-2020, Reliance Infrastructure declared a financial debt of `17,065 crore. Reliance Power defaulted on repayments to Axis Bank, Yes Bank and Lakshmi Vilas Bank due on January 31, 2020. Its total borrowings stood at `28,803 crore as on March 31, 2020.

In October 2020, Yes Bank initiated steps to attach Reliance Centre, the Mumbai headquarters of the group. The group is among the biggest borrowers of Yes Bank with a loan of `12,000 crore. The Enforcement Directorate (ED) had summoned Ambani in connection with the probe against Yes Bank founder Rana Kapoor in March 2020.

Ambani is making a last-ditch effort to be in the reckoning with the defence vertical. The ventures with Dassault Aviation and Thales of France are operational at Mihan, Maharashtra. The plan includes making components for Falcon 2000 jets and radars. A defence subsidiary, Reliance Armament, has submitted request for proposals for manufacturing light machine guns, sniper

rifles and other small arms worth over `6,000 crore. However, it has made little progress in showcasing these weapons and sending them for army trials, say sources.

The group did not respond to emails from BT.

Jaypee Group: Crisis Build-Up

The Jaypee Group, led by the 90-yearold founder, Jaiprakash Gaur, is struggling for survival. The Gaurs rose to fame when they constructed two huge dams, Sardar Sarovar and Tehri, in the 1980s. The group grew phenomenally between 2000 and 2010 riding on the realty and infrastructure boom. It invested `60,000 crore in real estate, power and cement. The combined revenues of three companies — Jaiprakash Associates (JAL), Jaiprakash Power Ventures (JPVL) and Jaypee Infratech — jumped 476 per cent to `27,925 crore in the seven years until FY2015.

The group has been in trouble for the last five-six years because of the heavy liabilities on its books. The major casualty in the group was Jaypee Infratech, which defaulted loans and filed for bankruptcy. Group revenues have more than halved to `13,560 crore between FY15 and FY20. The aggregate market value of the Jaypee Group companies, at around `7,030 crore (as on July 15), is one-seventh its March 2010 valuation of `45,951 crore, thanks to the debt, which touched `1.15 lakh crore in FY15 as the Gaurs bet on risky projects in roads, power, cement, power, real estate and hotels. Jaypee built India’s first F1 track, Buddh International Circuit, in 2011, spending `2,000 crore. But the venue was not part of the global F1 calendar in 2014. Jaypee stopped paying lease dues. The Yamuna Expressway Industrial Development Authority cancelled the lease in 2019.

The troubles came to a boil when the RBI put the flagship Jaypee Infratech in its first list of defaulters. Its Yamuna Expressway project between Noida and Agra with township area of 25 million square metres was hit by a slowdown in the real estate market. Construction of apartments along the Noida-Greater Noida Expressway was halted in 2013 after the National Green Tribunal stayed construction within 10 kilometres of the Okhla Bird Sanctuary. The total admitted claims of the banks were `9,782 crore. Mumbai-based Suraksha Realty is set to bag Jaypee Infratech as part of the IBC resolution process.

The cement business also saw a dip in profits but the company kept adding capacity. The hotel business came under pressure due to declining occupancy. Electricity prices fell after the country added additional capacity, affecting JPVL. The Gaur family is now left with two struggling businesses — JAL and JPVL. JAL made a consolidated loss of `667 crore in FY21 while JPVL posted a profit of `281 crore. There is hope that the Gaurs can turn around these companies. An ICICI Bank-led consortium,

had tried to take JAL to bankruptcy court in 2018, is working out a resolution plan outside the bankruptcy process. They propose to monetise the cement business and some land, according to sources. Reports say JAL will restart a few real estate projects, including the luxury project, Knight Court, in Noida.

The group has also been affected by a rift among the brothers. In July 2020, second son Sunny Gaur quit as director of JAL. Earlier, just before Jaypee Infratech’s bankruptcy filing, the other son, Samir, left the family business to pursue personal business interests. Eldest son Manoj has been calling the shots in the engineering and construction giant for years.

Emails to Manoj Gaur and group executives did not elicit any response.

Essar: The Debt Binge

In 2012, Shashi Ruia’s son, Prashant, took charge of three companies, Essar Oil, Essar Steel and Essar Power, with big plans to build assets. But the group ended up with a massive debt overhang. Essar Steel was in the RBI's first list of 12 big loan defaulters.

The Essar Group has come a long way from its heydays in 2014/15 when it was among India’s top five business houses with revenues of `1.6 lakh crore. Although high debt was one of the reasons for the downfall, the Ruias were also a bit unfortunate — they often found themselves at the wrong end of economic cycles. The refinery missed the scarcity and growth era of India’s oil sector. Steel capacity expansion happened when global prices had started to crash. Power plans started when India was reeling under a power shortage, but by the time the plants were operational, the country had excess capacity. The group lost Algoma Steel in North America, EPC Constructions India and Essar Power Jharkhand. Just before Essar Steel went bankrupt, the group was under a debt of `1.38 lakh crore.

Such huge debt is not surprising. The group, always ballistic about growth, invested as much as $18 billion between 2011 and 2017. It acquired Aegis BPO, refineries in Stanlow (UK) and Kenya, a mine in Minnesota, apart from the Algoma steel plant. In April 2010, the Ruias raised $1.3 billion by listing Essar Energy on the London Stock Exchange, only to delist in 2014 after value erosion.

Years before this, the Ruias had entered the telecom sector and even applied for building a refinery, in the mid90s. Essar Telecom rolled out mobile services in Delhi, Punjab and UP (East) in 1995/96. In 2003, a joint venture with Hutchison Whampoa expanded operations across India. Vodafone acquired Hutchison’s stake in 2007. Essar retained its stake. Between 2011 and 2017, the Ruias sold the 33 per cent stake in Vodafone for `22,350 crore, BPO unit Aegis for $910 million and Vadinar refinery and its captive power plant and port for $12.9 billion. This was not enough to clear Essar Steel debts. ArcelorMittal and Nippon Steel lapped up Essar Steel for `42,000 crore.

In April-May this year, the Stanlow refinery got into financial troubles. The refinery, bought from Shell in 2011, had pending repayment of $500 million credit from Lloyds Bank raised against receivables. When the pan which

demic affected business and cash flow, the British lender stopped acting as Essar’s main banker. Essar secured $850 million from various sources to replace the earlier loan and access additional capital. It is among the biggest assets for the Ruias and generated $300 million EBITDA a year prior to the pandemic.

The group now owns Essar Oil UK, Essar Shipping, Essar Ports and Essar Power. The group claims $14 billion (`1.03 lakh crore) annual revenues despite losing flagship businesses. It has 2,130 megawatt (MW) generation capacity across five plants. Essar Ports is India’s secondlargest private port operator, behind Adani Ports, with 110 mtpa capacity at four terminals. It also has five trillion cubic feet recoverable gas reserves across three coal bed methane blocks and one shale block. Besides, it controls 1.7 billion barrels of oil equivalent of recoverable conventional resources. Essar Power recently announced plans to build 90 MW solar capacity in Madhya Pradesh.

In mining and metals, it is building a seven mtpa pellet plant in North America. It has iron ore reserves of 2.3 billion tonnes in North America, 77 million tonnes of coal reserves in North America and 72 million tonnes of coal reserves in Indonesia. Essar Shipping & Oilfields owns 12 vessels.

“We are the only Indian corporate to repay `1.4 lakh crore loans in last three years to all financial stakeholders, who recovered over 100 per cent from IBC sale of our assets, which have seen an additional investment of over `50,000 crore by new owners,” says an Essar executive.

Binani: How the Empire Crumbled

Braj Bhushan Binani always had daughters Shradha and Nidhi Binani Singhania on his side while he was building Binani Cement. However, the slowdown in the construction business affected sales and margins. Binani Cement posted `347 crore losses in FY17 as against `181 crore profit in FY11. Financial creditors claimed `9,469 crore from Binani Cement while the company was undergoing the insolvency process.

This was in contrast to the company’s heydays when Binani fought the Birlas, ACC and Ambuja to build its 11.25 mtpa cement capacity. Troubles began with plants in China and Dubai that failed to make an impact. The domestic demand, too, fell due to a slowdown in the infrastructure sector. Binani cut operating costs but this was not enough to service the debt of over `6,500 crore. It was taken to NCLT in 2017. The flagship asset was sold to UltraTech for `7,950 crore by the bankruptcy court.

Binani still controls holding company BIL, which posted a consolidated loss of `1,255 crore on revenues of `1,642 crore in FY20. It had a market cap of just `17 crore while it was suspended from trading in November 2019.

BIL’s major subsidiary, Edayar Zinc (EZL), formerly Binani Zinc, also failed to repay loans, but convinced lenders for a one-time settlement of `175 crore. Binani is looking to sell the plant and machinery as scrap, apart from other mortgaged assets of EZL, including land. BT Composites, another subsidiary, is undergoing voluntary liquidation, according to the director’s report for FY21. “The company has sold all its assets and paid off liabilities and has filed an application for dissolution,” it said.

BIL’s glass fibre business has been affected by the pandemic and the troubles in the automotive sector. UltraTech recently took over 3B Binani Glass Fibre Sarl Luxembourg by taking over the pledged shares of the company from Bank of Baroda London. BIL Infratech, another subsidiary, has sought resolution of long-term debt. Emails to BIL failed to get any response.

In 2019, Punjab National Bank stopped Binani from flying to London on a chartered flight by issuing a lookout notice. The notice was issued as he failed to turn up at the Kolkata Bench of the NCLT after EZL failed to repay a loan of `300 crore.

Bhushan: Fall to Shame

In February 2019, Udaipur was witness to a dazzling three-day celebration. Neeraj Singal, the then head of Bhushan Steel Ltd (BSL) and the younger son of Brij Bhushan Singal, had booked most palace-turned-hotels in the city to make his daughter's wedding a royal affair. Neeraj's elder brother, Sanjay, who was running Bhushan Power and Steel (BPSL), which became insolvent later, had organised a similar lavish wedding for his daughter in 2010.

Today, Neeraj Singal has no noticeable business following BSL’s bankruptcy in 2017. BSL had a market value of `10,267 crore in March 2014, but it fell by one-seventh in the next one year to `1,492 crore, thanks to debt overload and investigations in the company. The aggressive expansion — he built 5.6 MT capacity — left the company with a combined debt of `49,957 crore in March 2017 compared with `11,404 crore in March 2010. This was a period of low demand. BSL’s costs were high and capacity utilisation just 50-60 per cent, say experts.

On the other hand, the debt of Sanjay Singal’s 3.5mt BPSL rose from `13,401 crore in March 2011 to `37,978 crore in March 2017 as he went for aggressive and costly capacity creation. He lost his company in the first round of bankruptcy proceedings in 2017. One reason for rapid expansion by both the companies, say industry insiders, was the race between the brothers to better the other after they split the family business following a bitter public spat in 2011. Sanjay was working alone while Neeraj had the backing of his father.

The Central Bureau of Investigation (CBI) had ar

rested Neeraj for allegedly bribing Syndicate Bank Chairman S.K. Jain to extend the company's credit limit in 2014. While on bail in August 2018, SFIO arrested him for allegedly siphoning off over `2,000 crore. He is also facing an ED investigation in a money laundering case. The matter is before the Supreme Court.

The Singal brothers don’t have any other business but would have personal wealth, say industry sources. The Singals did not respond to phone calls and messages from BT.

Videocon: Dhoots’ Lost Magic

Just before Diwali in 2019, workers of Videocon Industries Ltd’s (VIL’s) largest plant in Aurangabad collected alms for Venugopal Dhoot, the plant’s former owner. They had not been paid their salary for months.

VIL’s market value was `6,340 crore in June 2013, but it crashed to below `100 crore because of bankruptcy filing. About 12 years ago, VIL had consolidated yearly revenue of `12,200 crore and profit of over `810 crore. In FY19, when it filed for bankruptcy, it posted a loss of around `7,250 crore. The debt of Videocon companies increased from `6,952 crore in 2007 to `58,573 crore in 2019. About `21,000 crore was in the international oil exploration and production business. Experts blame capital-guzzling telecom services business and acquisition of Thomson SA’s picture tube manufacturing facility in 2005 at a time when LCD and LED technologies were about to take off. The group is estimated to have lost `7,000 crore in telecom. The unsuccessful attempt to transform the glass shells (for picture tube) factory in Gujarat to LED manufacturing unit had cost the group `4,000 crore. A financially weakened company could not survive the onslaught of global giants LG and Samsung. Dhoot spent heavily on oil exploration but production was delayed. He also bought land parcels to build power

plants. It was more than he could chew.

Gajanan Bandu Khandare, President, Videocon Group Employees Union, says the Dhoots got rid of their responsibilities by defaulting on bank loans. “Are these businessmen in poverty after they lost their companies? They are enjoying life. Only workers are in poverty,” he says. The employees submitted claims worth `103.5 crore to VIL’s resolution professional. Claims from financial institutions amounted to `61,770 crore. A month ago, the bankruptcy court approved Vedanta Group company Twin Star Technologies’ offer for Videocon Group, making it the first group-level debt resolution under IBC. Vedanta’s offer of `2,962 crore for the 13 group companies was way below lenders’ expectations but above the liquidation value. The NCLAT stayed the NCLT's order after some creditors filed an appeal as they were unhappy with the valuation

Dhoot was also named in a controversy with former ICICI Bank CEO & MD Chanda Kochhar and husband Deepak Kochhar. There was an alleged quid pro quo between Dhoot and the Kochhars under which `64 crore was transferred to Deepak Kochhar's company, NuPower Renewable Private Ltd, for getting loans sanctioned by ICICI Bank in 2009. Dhoot did not respond to phone calls and messages.

Lanco: Vanished Into Thin Air

The Lanco Group got public attention in 2007 with its unimaginably low bid for India’s first ultra mega power project. Group company Lanco Infratech quoted `1.19 per unit to win the 4,000-MW project in Sasan, Gujarat. The bid by Lanco, owned by former Vijaywada MP Lagadapati Rajagopal’s family, was cancelled due to flawed documents. The project finally went to Reliance Power.

Though it lost the Sasan project, by 2013 Lanco had 4,700 MW capacity under L. Madhusudhan Rao, the younger brother of Lagadapati Rajagopal. It secured $1.5 billion funding for an additional 1,320 MW power plant in eastern India; floated a subsidiary in Singapore for foraying into power projects in emerging markets; partnered with Indonesian miner Bukit Asam; and pursued solar energy projects in Europe and the US. The Rao familycontrolled Lanco Infratech had a net worth of `4,643 crore in March 2012, but it eroded to negative net worth of `466 crore by March 2015.

Lanco posted losses of `2,260 crore on revenues of `7,343 crore in FY17, thanks to its huge financing costs due to a debt pile of `49,960 crore. The market capitalisation of `12,592 crore in March 2010 had crumbled to `1,099 crore just before it filed for bankruptcy. In 2017, at the time of bankruptcy, it had 3,460MW capacity and was in the process of building an additional 4,636MW.

Legal sources say a dozen group companies (mostly project specific special purpose vehicles) are at different stages of insolvency. State-run NHPC has bagged the 500MW Lanco Teesta VI hydro power project through the corporate insolvency resolution process.

Amtek: Paying For Overleverage

Arvind Dham, the erstwhile promoter of Amtek Auto, tried to give away his personal wealth to save the company from bankruptcy in 2017. The low-profile industrialist has been able to sell some non-core assets but not enough to save his flagship company.

Amtek Auto posted a loss of `2,068 crore on revenues of `13,368 crore in FY17, just before filing for bankruptcy. Four Amtek group companies — Amtek Auto, Castex Technologies, Amtek Ring Gears and Metalyst Forgings — have filed for bankruptcy so far. Then there is JMT Auto, a subsidiary of Amtek Auto.

Dham’s fairytale journey as an original equipment manufacturer to Tata Motors, Fiat and Ford India was unstoppable at one point. Between 2005 and 2014, he made 22 acquisitions in iron casting, metal forging and machining segments. This gave Amtek marquee clients such as Aston Martin, BMW and Daimler. Dham then got into publication, pharmaceuticals and information technology but tasted failure.

Amtek invested `5,000 crore in the domestic market between 2011 and 2014. However, it led to a cash flow mismatch. In 2014, the business generated $2.5 billion revenue from overseas and $1.5 billion from domestic operations. In financial year ended September 2014, it had a consolidated debt of `17,663 crore.

Amtek Auto first defaulted, on `800 crore bonds, in September 2015. Things went from bad to worse. The admitted claims of financial creditors were `12,300 crore while the company was undergoing the insolvency process. Lenders failed to sell Amtek Auto through the resolution process for four years. Finally, in October last year, they filed a petition invoking Dham’s personal guarantee. But they are not sure whether Dham owns any meaningful assets. Amtek did not reply to emails.

Jet: A Bad Crash-Landing

In May 2019, the Emirates flight EK 507 from Mumbai to Dubai was called back from the tarmac to deplane Naresh Goyal and wife Anita. Goyal, who founded the enviably classy full-service airline Jet Airways in 1993, had been restricted from flying abroad based on a lookout circular of the Ministry of Corporate Affairs and SFIO. When he pleaded for permission to fly, the Delhi High Court asked him to deposit `18,000 crore, the amount Jet owed to banks, employees and vendors.

At its peak, Jet Airways posted a profit of `1,445 crore on revenues of `2,2692 crore in FY17. However, it incurred a loss of `724 crore in FY18. The insolvency plea of

the lenders was admitted by the NCLT in June 2019.

Jet’s financial troubles started with the `1,450 crore Air Sahara acquisition in 2006. Goyal reportedly ignored the advice of professional associates that he was paying too much. The management also failed to realise the might of low-cost carriers — IndiGo, SpiceJet and GoAir — which offered discounted fares, quality offerings and on-time services. Fluctuating fuel prices and failure to attract investors nailed its fate.

Lenders forced Goyal to step down from management in March 2019 but he failed to evade bankruptcy. An email to Naresh Goyal failed to elicit any response.

A consortium of UAE-based businessman Murari Lal Jalan and UK-based Kalrock Capital has emerged as the largest bidder during insolvency proceedings. It plans to restart the airline by the end of the year.

In March, a Mumbai court closed a cheating case against Goyal. The ED challenged this in the Bombay High Court. Its petition was rejected. Goyal was also questioned by the ED in connection with the money laundering probe against Yes Bank promoter Rana Kapoor and family members. Yes Bank has a `550 crore exposure to Jet Airways.

Ruchi Soya: Irreversible Slip

Dinesh Shahra started edible oil trading in 1955. He founded Ruchi Soya in 1986. In 25 years, it became a `30,000 crore company, the largest marketer of edible oils, soya food, premium table spread, vanaspati and bakery fats in the country.

Ruchi Soya had a peak valuation of `3,521 crore in March 2011. Troubles began in November 2011 when Indonesia, from where Ruchi Soya sourced raw materials, increased tax on crude edible oil exports and reduced duties on refined oil exports to encourage refining in the country. The cost escalation hit margins of Ruchi Soya’s 13 refinery units. The market cap crashed to `517 crore in March 2018 soon after it was admitted for bankruptcy. The company’s debt at that time was `7,504 crore. Shahra even tried to rope in some private equity players for raising funds. Ruchi Soya was sold to Patanjali Ayurved in the insolvency process.

Uttam Galva: Losses Galore

The Rajinder Kumar Miglani-led family lost three companies to loan defaults. In 2017, it lost two subsidiaries, Uttam Galva Metallics and Uttam Value Steels, which

are the mainstay of specialty steel company Uttam Galva Steels (UGSL), to bankruptcy filings. UGSL was saved for some time as L.N. Mittal's ArcelorMittal had a stake in the company. In order to qualify for the Essar Steel bid, ArcelorMittal sold its 29 per cent stake for `1 and bought out the loans of UGSL worth `4,922 crore from the banks. In effect, the global steelmaker turned UGSL’s biggest creditor. But the Miglanis failed to keep UGSL healthy and filed for bankruptcy in October 2020.

UGSL generated a profit of `55 crore on revenues of `6,612 crore in FY13. In FY19, it posted a loss of `2,146 crore on revenues of `757 crore. Its debt is around `7,440 crore. UGSL got into trouble due to high operating costs and dip in sales. Banks stopped providing working capital after noticing cash flow constraints. This resulted in the plant operating at sub-optimal capacity. This further affected cash flows.

Miglani had started his business career in the 1960s by importing galvanised steel. By 1985, he had become the largest importer of galvanised steel, feeding half the country’s consumption of two lakh tonnes. Later, he put up a production line. As the market turned dynamic, he set up his own cold-rolling facility and went downstream into colour-coated steel. Besides the ArcelorMittal connection, he had a deal with Posco of South Korea to build a 3 million tonne steel plant. But the project never took off.

Alok: Unending Litigation

In November 2019, at a hearing in a London court over non-repayment of dues by the Jiwrajka brothers, who controlled the bankrupt Alok Industries, there was no lawyer to represent the defendants. SBI’s London branch had filed the case for a `91 crore claim against the three Jiwrajka brothers - Ashok, Dilip and Surendra - who owned Grabal Alok UK that had 216 fashion stores in the UK under the 'Store Twenty One' brand. The court ruled in favour of SBI.

Alok Industries, the flagship of the Jiwrajka family, was once among the best performing vertically integrated textile companies in the country. It posted a profit of `254 crore on revenues of `24,382 crore in FY15. But the cookie crumbled after its ambitious debt-fuelled expansion went wrong.

The Jiwrajkas had started the textile business modestly in 1986 with a single unit in Silvassa. Over the next two decades, they built a portfolio of several blue-chip clients — Walmart, JC Penney and Target — and a chain of over 130 stores in India under the

H&A brand. Nearly a third of their revenues came from exports.

Encouraged by the success, in 10 years until 2013, the company spent `10,000 crore on expansion and built spinning, weaving, processing and garment units. Its domestic retail plans did not take off and exports fell sharply amid global competition. Then, the Jiwrajkas tried to diversify into real estate. All this took debt to `25,505 crore in March 2017. Alok Industries filed for bankruptcy. Store Twenty One also entered compulsory liquidation in the UK.

The Reliance Industries-JM Financial ARC consortium took over Alok Industries by paying `5,050 crore in the resolution process. The Jiwrajka brothers do not own any meaningful business assets in India now.

There are many others who destroyed wealth by irrationally expanding and diversifying using debt. Some even tried to siphon off funds from public companies to private entities. The IBC, however, has made businessmen cautious as one wrong step can destroy decades of hard work.