India’s corporate sector too witnessed cataclysmic changes that continued into the second decade of the twenty-first century. India’s inherently chaotic financial sector turned tumultuous when borrowings of Indian corporates, especially those headed by well-connected entrepreneurs, increased exponentially.
Delays in obtaining land and environmental clearances and rising finance costs made it difficult for corporates to repay debt. Fortunes and reputations, which had taken decades to build, were lost in the blink of an eye. Careers of India’s one-time iconic CEOs, like Subrata Roy, Nirav Modi, Naresh Goyal, Vijay Mallya, VGS, Anil Ambani, Chanda Kochhar, Rana Kapoor and Ravi Parthasarathy, came to naught.
In 2014, for instance, Subrata Roy, the promoter-CEO of India’s largest residuary non-banking finance company, Sahara India Financial Corporation (SIFC), was arrested. After the RBI debarred the Sahara Group’s flagship entity, the unlisted SIFC, from raising fresh deposits from the public way back in 2008, Roy floated multiple companies that announced ₹40,000 crore (over $9.0 billion) issues of optionally fully convertible debentures (OFCD).7 The terms and conditions of these OFCDs contravened Securities and Exchange Board of India (SEBI) norms. Further, defaults by multiple Sahara group entities, some of which were listed, opened a can of worms that led to Roy’s arrest in 2014. However, following his mother’s demise, he was granted parole from prison in May 2016.8,9 Indian courts extended Roy’s parole multiple times and he has not returned to prison since 2016.
Diamantaire Nirav Modi, and his uncle, the jeweller Mehul Choksi, in connivance with employees of state-owned Punjab National Bank (PNB) generated fraudulent letters of credit (LCs) worth ₹13,600 crore (around $2.0 billion in 2017) for over a decade.10 The uncle and nephew duo had used these fake LCs to make business purchases and siphon money into their personal accounts held outside India. Modi and Choksi fled India in January 2018 before their scam was uncovered. Modi’s flagship entity was the unlisted Firestar International Private Limited and Choksi was the CEO of the listed Gitanjali Gems. Modi was arrested in London in March 2019 and is awaiting extradition to India. Mehul Choksi lived in Antigua after obtaining citizenship of the island nation until May 2021, when he was reported missing. Later, he was arrested in Dominica and is undergoing court proceedings for his extradition to India. India’s Central Bureau of Investigation (CBI) has tied up with INTERPOL to apprehend Choksi.
Veerappa Gangaiah Siddhartha or VGS as we refer to him in this book, a first-generation entrepreneur, was born in a family that had owned coffee plantations for over a century. He introduced the newly-liberalized India of the 1990s to the café culture. His Café Coffee Day outlets, the dominant business of Coffee Day Enterprises Limited (CDEL), is India’s largest café chain. VGS was also a renowned tech investor who had reaped handsome profits by investing in IPOs of IT companies, including those of Infosys and Mindtree. The son-in-law of former Karnataka chief minister, S.M. Krishna, the then sixty-year-old VGS died by suicide in July 2019. He stated in his suicide note that pressure from private equity investors and harassment from a former director general (DG) of Income Tax had driven him to this decision.
Naresh Goyal, born in modest circumstances, began his career as an employee in his uncle’s travel agency. How he acquired the wealth to launch one of post-independent India’s earliest private sector airlines is subject to much conjecture and controversy. Goyal acquired a deep understanding of the airline industry, the network to raise vast sums of money for financing the capital-intensive airline business and the ingenuity to influence the government to structure legislation to benefit Jet Airways, and sometimes to the detriment of India’s flag carrier, Air India. Yet, Jet Airways’ failure to repay the vast debt it had accumulated resulted in Goyal’s ouster. The airlines’ equity investors witnessed a substantial diminution in the value of their investments.
In stark contrast to Naresh Goyal, Vijay Mallya was the scion of one of India’s most profitable conglomerates, the United Breweries (UB) Group, and a successful liquor baron in his own right. He attempted to operate Kingfisher Airlines as a top-end, full-service airline priced at par with budget carriers. The investment he made in Kingfisher Airlines paled in comparison to the astronomical debt the airline incurred. It was unable to generate adequate cash flows to pay its employees and vendors and service its debt. Caught in a bind, Mallya, who was also a Member of Parliament (MP), surreptitiously flew to the UK using his diplomatic passport. Despite Kingfisher Airlines’ lenders seizing some of his stake in UB, the value of his remaining holdings in UB and personal wealth enable Mallya to continue leading a lavish life.
In July 2021, a UK court declared Mallya bankrupt, enabling lenders to freeze his assets worldwide and secure repayment of the defunct Kingfisher Airlines’ borrowings.13 Equally dramatic is Anil Ambani’s riches-to-reported rags story. Soon after the demise of Reliance Group founder-CEO, Dhirubhai Ambani, in 2002, it became apparent that Anil Ambani and his older brother, Mukesh Ambani, did not see eye to eye. In 2005, the Reliance Group was divided between the two brothers, with Mukesh Ambani getting the lion’s share. The exact quantum of cash that Mukesh paid Anil to make good the difference in the size of their bequests is subject to much speculation.
Anil began his empire-building spree with a bang. In addition to overseeing the expansion of the telecom, finance and power companies he had inherited, he made forays into defence and entertainment. The blockbuster Reliance Power IPO in 2008 made him the sixth richest man in the world with a net worth of $42 billion, which was just a billion short of the net worth of the world’s fifth most affluent man—Mukesh Ambani. Yet, Reliance Power’s dependence on Mukesh’s Reliance Industries for natural gas supplies, the siblings’ conflict-ridden relationship and Anil’s failure to generate sufficient earnings from his capital-intensive businesses to repay the sizeable debt did him in.
This excerpt from Nandini Vijayaraghavan’s ‘Unfinished Business: Evolving Capitalism in the World’s Largest Democracy’ has been published with permission from Penguin Random House India.