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.