Quest To Save Essar

As Debt Hits ₹1.38 Lakh Crore, the Ruias Are Looking to Recast the Group Once Again.

- Nevin John

From his 19th floor office at Essar House in Mumbai’s Mahalaxmi, the world would seem vastly different to Essar group director Prashant Ruia by the end of 2017. It may remind him of a statement in William Shakespeare’s Hamlet: “Neither a borrower nor a lender be; for loan oft loses both itself and friend”.

Caught in a debt trap, Ruia has been forced by lenders to sell and restructure to pay off hefty loans it is struggling to service. By the time Ruia concludes the painful exercise, the Essar group will shrink to a third of its peak revenues of $27 billion in 2014/15. At $8.6 billion (₹55,000 crore), it would be down seven notches to become the 10th largest business house in the country.

Based on the 2015/16 numbers, net losses for the group will be in the range of ₹4,000-4,500 crore. Prashant Ruia expects group revenues to be $15 billion (₹96,550 crore) by March 2018 as the steel business cycle is turning round. That will be where the group was in 2011. “I don’t see it as significant erosion,” he says.

But as American author and radio host Dave Ramsey says, “You can’t be in debt and win. It doesn’t work.” The shrinking of the group is a body blow to the Ruias’ reputation and ambition. “We look forward to being more prudent. We are looking for a much stronger balance sheet, especially after refinery monetisation,” says Prashant Ruia.

When the going was good and the government had just relaxed debt-equity norms, banks were tripping over each other to lend. Ruias borrowed heavily and locked horns with every possible business house – Tatas and Jindals in steel and power, Airtel in telecom and Adani in ports. They also challenged the might of the Ambanis with the Vadinar refinery being in teasing distance from Reliance’s Jamnagar refinery. The inordinate delay in setting it up got tongues wagging about rivalry and corporate influences.