The Jet Airways has become the latest addition in the long list of companies that have crumbled over the last few years. However, there are many companies that, like Jet Airways, were once industry leaders but now have become a shadow of their former past.
These are those firms or conglomerates that at one point, ruled their respective industries. In fact, their fall from the top can be termed as TGIF, ie The Great Indian Fall.
There are three noticeable trends behind the downfall of these companies:
- Mistakes
- Mismanagement
- Fraud
Some of the companies were affected due to poor business decisions and or mismanagement of the board members. While others were affected due to poor corporate governance, ie the board didn’t act responsibly or regulators failed to comply their duty of regulating these companies. The third trend was of fraud in which rules were broken.
Various instances under the above trends made headlines and then slowly, disappeared from the news cycle. But if you connect the dots and look at the complete picture, you can see for yourself that it’s a “Dirty Picture.”
The situation is shocking and problematic because it proves that the perceived growth of Indian economy doesn’t add up with the reality as one after the other, the business icons and industry leaders continue to fail.
Let’s take a look at some of the companies/individuals that are in trouble due to financial mismanagement.
1. Jet Airways
Until recently, Jet Airways was an industry leader. They had 119 operational aircraft flying high. But now, the brakes have been pumped. The airline was brought to a screeching halt on 17 April when its operations were temporarily suspended.
The company is under a debt of Rs 8,500 crore. The lenders aren’t ready to loan them any more money to bail out the airline. The company has no money to pay even its employees or get fuel for the aircraft. Naresh Goyal had to step down from the post of chairman. The company will surely be up for auction.
2. Anil Ambani’s Several Business Failures
Anil Ambani was one of the biggest faces in the Indian corporate world. When he parted ways with his brother Mukesh Ambani, he received Rs 4,500 crore. However, from Reliance Communications to any company that he invested in, his business has tanked.
He has debts worth almost Rs 1 lakh crore. His elder brother had to bail him out by providing him Rs 550 crore so that Anil Ambani could pay up Ericsson and avoid a jail term of three months.
3. Essar Steel
Essar Steel declared bankruptcy in 2018. The company is under a debt worth Rs 49,000 crore. ArcelorMittal bought it for Rs 42,000 crore earlier this year. The Ruia family, which was the promoter of Essar Steel, tried to stop the auction but failed. The family even offered to invest its own money but by then, it was too late.
4. Essel Group
Essel Group has been finding it difficult to repay Rs 12,000 crore to its creditors. Chairman Subhash Chandra apologised in an open letter on 25 Janurary 2019. Now, in a bid to pay off its debts, Subash Chandra is looking to sell his stakes in the parent company of Essel Group, Zee Entertainment.
5. Jaypee Infratech
The financial disaster of Jaypee Infratech has also destroyed the hopes and dreams of 22,000 people who wanted to buy a house from them. The real estate company kept on spending money but was unable to deliver any of its projects on time. A bankrupt Jaypee group is about to be acquired by the National Buildings Construction Corporation (NBCC).
The company is unable to pay back its debt of around Rs 10,000 crore. Around 22,000 buyers are still awaiting possession of their houses. Work on the Yamuna Expressway has also been halted.
These were examples of corporates that crumbled due their mistakes or financial mismanagement. Now, let us take a look at the companies that were destroyed due to fraudulent practices.
1. IL&Fs
The story of Infrastructure Leasing & Financial Services (IL&FS) is the “mother of all collapses.” The company has whopping debt of Rs 99,000 crore. It is facing allegations of money laundering and lack of transparency.
This company was handed government contracts on a platter. Yet, it suffered major losses in projects like Gujarat’s GIFT city. Two former IL&FS officials are now in jail.
2. Nirav Modi’s Venture
Nirav Modi has become a household name at this point. He is still in headlines. He was the industry leader in the diamond market but today, he is in a jail cell in London. He fled the country after defrauding banks to the tune of Rs 11,000 crore.
The fraud was of such an extent that he fabricated LOUs (Letter of Understanding) in collusion with Punjab National Bank officials. He is also facing allegations of tax evasion. Even his uncle Mehul Choksi followed the same path. He defrauded the banks of Rs 4,886 crore. Choksi's registered company Geetanjali Gems is about to be liquidated.
3. Bhushan Steels
Bhushan Steel has been bought by the Tatas for Rs 29,000 crore because they were unable to pay off debt worth Rs 47,000 crore on their books. There are allegations of diverting funds worth Rs 2,348 via fake companies. Promoter of the company, Neeraj Singhal has been arrested. An investigation is underway. The Central Bureau of Investigation also raided a Bhushan Steels property on 6 April.
4. DHFL
Dewan Housing Finance Corporation, a housing loan lender, currently has debt of Rs 93,000 crore. It's facing allegations of fraud worth Rs 31,000.
The company allegedly donated Rs 20 crore to the BJP even as it is undergoing a serious financial crisis.
5. Videocon
The Videocon Group has a debt of Rs 90,000 crore. A case of fraud has been registered against its chairman Venugopal Dhoot. There are also allegations that ICICI bank officials would get 10 percent kickbacks on loans that they would approve.
ICICI’s former MD and CEO Chanda Kochhar has also been accused for involvement in the same.
6. Singh Brothers
Malvinder Singh and Shivinder Singh, who at one point were at the helm of a major pharma company Ranbaxy, are likely to face jail time. They owe Rs 3,500 crore to Japanese company Daiichi Sankyo, which they are unable to pay.
They have to pay back the Japanese company because they failed to disclose that American regulatory agency FDA was investigating Ranbaxy over the the allegations of making spurious drugs. They have also been accused of defrauding Fortis of Rs 400 crore.
7. Sun Pharma
During December 2018 to January 2019, shares of Sun Pharma tanked. This happened because of allegations that the pharma giant was being lax while disbursing loan worth Rs 2,200 crore. The firm is also accused of diverting funds from a public company to a private company. SEBI and Mumbai Police are investigating the case.
The stories of mistakes, mismanagements and frauds range across all the financial sectors and industries in the country. But the worst of the lot is the banking sector. Increasing value of NPAs has shattered the backbone of most of the banks. Loans worth Rs 10 lakh crore have been termed bad loans.
Corruption in prominent banks like PNB, and ICICI bank as also been exposed. These cases are mere highlights. The list is quite long. But the most shocking part is that despite a massive corporate bloodbath, most of these stories didn’t make the headlines.
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