In Search Of Champions

In India’s recent business history, the late nineties can be considered the age of the automobile industry and infrastructure, and the first two decades of the 21st century saw multiple booms in information technology, aviation, telecom, real estate, retail and health care. Approaching the start of the third decade, however, any bank looking to lend to corporations in high-growth, and relatively low-risk, businesses would be hard put to find them. IT is slowly reaching its zenith, and without a great leap forward in business models is likely to decline. Telecom is struggling under high debt and acute competition; real estate is stuck in a long slump of oversupply and physical retail struggles with footfalls, competition from e-commerce and rising costs. E-commerce, the flavour of the past decade, will continue to grow on the back of private equity and venture capital that, by definition, can absorb the greater losses of this nascent business. But no one in this space is anywhere near making money. In short, there are few champions to be found in India Inc today.

The past year alone has seen marquee names in several key industries on the verge of losing control of their businesses. For instance, after multiple serial governance failures, the Singh brothers are out of Fortis and Religare, and are tied up in bizarre cases against each other as well as against the Japanese buyers of Ranbaxy, once a racehorse of the pharmaceutical business.

Jet Airways, whose share price is a third of what it was a year ago after it defaulted on bank loans in January, now faces the prospect of being taken over by banks. Subhash Chandra’s Essel group, which has bad debts of Rs 13,000 crore sunk in an ill-chosen foray into infrastructure, is trying hard not to lose control of its flagship Zee Entertainment. Anil Ambani’s Reliance Communication, whose stock now quotes at around Rs 6 from Rs 111.50 five years ago after lenders dumped pledged shares, has been taken to the National Company Law Tribunal (NCLT) by its debtor Ericsson to recover due of Rs 1,154 crore.

Essar Steel’s future ownership is ricocheting between the NCLT and the appellate tribunal as the promoters hope to keep a foothold. And B M Khaitan of the McLeod group announced that it will auction a major chunk of its 45 per cent stake in Eveready Batteries, the market leader in dry cell batteries and flashlights, to pare debt; last year, the group’s loss-making tea flagship McLeod Russell sold several tea estates. Professionally-managed Infrastructure Leasing and Finance Services has seen its entire board and senior management replaced after it was revealed that its 348 subsidiaries had built up debts of Rs 91,000 crore. The Tata group’s ill-fated Tata Teleservices sold its consumer mobile business to Bharti in an extraordinary debt-free, cash-free deal, and is searching for a buyer for its fibre-optics business. Seen in its entirety, this is an extraordinary destruction of value in a short period of time. India desperately needs new champion sectors that are also profitable so that they can finance future growth. – Business Standard