Tuesday 27 October 2020

Corporate sector wasn’t going great guns even before COVID

If the corporate sector is struggling amid a large section of the industry locked down worldwide, it was not doing well even before the coronavirus disease outbreak. For many Indian tycoons, 2019 had turned woeful as lenders empowered by the nation’s then-recent bankruptcy law as they were desperate to clean up soured debt from their books. The system started seizing assets of delinquent firms or dragged them into insolvency.

Indian banks wrote off a record $ 39 billion of loans in the 18 months through September in a bid to repair their balance sheets as they battled the world’s worst bad debt pile. Making matters worse, a shadow banking crisis led to a funding squeeze, crushing debt-laden businesses that were critically dependent on rollover financing.

“Life has come a full circle for tycoons that had enjoyed debt-fueled growth,” said Nirmal Gangwal, founder of distress and debt restructuring advisory firm Brescon & Allied Partners LLP. “Many firms collapsed like a house of cards. The downfall was rather unprecedented.”

The government has been cracking down on crime in the corporate sector to assuage public anger over absconding businessmen. It debarred some from travelling overseas if they were deemed a flight risk.

Here are some of the country’s biggest and most-storied heads of corporate houses who saw their fortunes fade. Spokespersons for these tycoons didn’t immediately reply to emails and text messages seeking comments.

Corporate collapse: Anil Ambani

The chairman of Reliance Group, which makes movies to metro lines, had a close shave with jail time in March before his elder brother and Asia’s richest man, Mukesh Ambani, bailed him out at the last minute. The woes of the ex-billionaire came to the fore when the Supreme Court asked him to pay Ericsson AB’s India unit about $ 77 million of past dues or go to jail since Anil Ambani, 60, had given a personal guarantee.

Anil Ambani’s telecom carrier slipped into insolvency this year, while unprofitable Reliance Naval & Engineering Ltd. faced a cash crunch. Reliance Capital Ltd. is selling assets to pare debt. Ambani is fending off Chinese lenders in a London court.

Malvinder & Shivinder Singh: Another corporate flop

Their demons of the past rose again as former billionaires and brothers Malvinder Singh, 47, and Shivinder Singh, 44, scions of a prominent business family who once helmed India’s top drugmaker and second-largest hospital chain, were arrested in October last on charges of fraudulently diverting nearly $ 337 million from a lender they controlled. India’s market regulator found in 2018 that the brothers had defrauded their hospital company of about $ 56 million.

The collapse of the $ 2 billion business empire turned brother against brother, prompting their mother to broker a peace deal that was short-lived. In February, Malvinder accused Shivinder and their spiritual guru of fraud.

Shashikant & Ravikant Ruia

After a hard-fought battle to keep their flagship steel mill, the first-generation entrepreneurs finally saw the bankrupt Essar Steel India Ltd. pass on to Arcelor Mittal last month in yet another story of corporate collapse. The $ 5.9 billion-worth takeover was almost two years in the making with multiple legal wrangles.

The group, controlled by Shashikant Ruia, 76, and Ravikant Ruia, 70, were also reprimanded by a UK judge in March this year for concealing documents. Started in 1969 as a construction firm, Essar Group diversified, investing about $18 billion between 2008 and 2012, and piled on debt. In 2017, the group had sold another prized asset, Essar Oil.

VG Siddhartha

Before jumping off a bridge into a river in July in an apparent suicide, the founder of India’s biggest coffee chain Cafe Coffee Day had penned a letter that spoke of pressure from lenders, a private equity firm and harassment by tax officials.

https://sirfnews.com/singhvi-irresponsible-unethical-fellow-lawyer-condemns-act-of-politics-over-dead-body/

He had spent much of the last two years pledging ever more of Coffee Day Enterprises Ltd. shares to refinance loans for ever shorter periods, at ever-higher interest rates. “I would like to say I gave it my all,” VG Siddhartha, 60, wrote in the letter. “I fought for a long time but today I gave up.”

Naresh Goyal

The former ticketing agent who built India’s largest airline by value, stepped down as chairman of Jet Airways India Ltd in March, caving in to pressure from banks who took over the company. Cut-throat price wars and surging costs pushed Jet deeper into a loss.

The airline stopped flying in April and went into bankruptcy two months later as lenders failed to find a buyer. In July, an Indian court barred Naresh Goyal from flying overseas after the government said it was investigating an alleged $2.6 billion fraud involving Jet Airways.

Rana Kapoor

This corporate corruption was about banking. The founder of Yes Bank Ltd, which became India’s fourth-largest non-state lender, tweeted in September 2018 that his shares were invaluable and requested his children never to sell them upon inheritance. But trouble was brewing.

The nation’s banking regulator, which found the lender had repeatedly under-reported its bad loans, refused to extend his tenure as chief executive officer. This forced Rana Kapoor, 62, to step down by end-January. Kapoor, who has pledged some of his Yes Bank shares in July, sold almost his entire stake in the lender by October.

Subhash Chandra of corporate media

The rice trader-turned-media mogul, 69, who brought cable television into Indian homes in the early 1990s with his Zee TV, resigned as chairman of Zee Entertainment Enterprises NSE 2.05 % Ltd. in November and lost control of his crown jewel.

To help pay the debt of Essel Group, the corporate media entity, Subhash Chandra has been selling a stake in Zee Entertainment in the past few months to repay the group’s debt.

Gautam Thapar

A default by Gautam Thapar, founder of the paper mill-to-power transmission Avantha Group, on pledged shares made Yes Bank Ltd. the biggest shareholder in CG Power and Industrial Solutions Ltd.

In August, the firm was hit by an accounting scandal forcing the board to remove Thapar, 59, from the chairman’s post. A month later, the market regulator ordered a forensic audit of the firm and barred Thapar from accessing securities market.

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