Billions To Bust

Lessons from the failure of some of India’s biggest business names.

- Nevin John

AS THE SALE OF ESSAR STEEL under the Insolvency and Bankruptcy Code, or IBC, moves a step closer, its past owner, the Ruia family, is coming to terms with the fact that re-building its business empire to the scale it enjoyed just five years ago might take decades. At its peak, the group, promoted by brothers Shashi Ruia and Ravi Ruia, and at present run by Shashi’s son Prashant Ruia, had interests in half-a-dozen sectors — oil refining, power, steel, ports, telecom and BPO, in India and abroad. In 2014/15, it was among the top five business houses in India with revenues of ₹1.6 lakh crore. It had also run up a debt of ₹1.3 lakh crore.

After the IBC process is over, the Ruias would have lost not only their crown jewel, Essar Steel (₹20,000 crore revenue in the last financial year), but also a number of power and port assets that lenders are referring to the National Companies Law Tribunal or NCLT. They will still own some companies but the group will be less than one-third the size it was five years ago.

The Ruias did everything possible to hold on to Essar Steel. In 2016, they sold their Vadinar oil refinery, a captive power plant and a port for $12.9 billion to pay off some group-level debt. They even tried to bid for Essar Steel when it was offered for sale under the IBC. But the government changed the IBC rules and barred promoters from bidding unless they paid banks the entire money owed by them.

The only consolation is that even after losing Essar Steel, the Ruias would control several companies with combined revenues of over $7 billion, thanks to the Stanlow refinery in the UK. Several others who had built their business empires using cheap debt during the go-go years of the economy in the last decade would consider them lucky. They, after all, are losing almost everything they ran.