Job creation through infrastructure development, manufacturing and new green revolution requires apart from a lot of things, a lot of money too. Inclusive development involves banks and financial institutions stay liquid and strong, with loans and payment cycles running smooth. If the lakhs of crores stuck with a mere score of entities can come back to system, wheels of our Make in India lion could roll friction free.
The current scenario of bad loans is actually bad! It is not on account of an experiment that failed; but due to malicious diversion of funds; absolute greed and parasitic behaviour of a few cunning people. This creed of human beings, however rich they may be, will not change their crafty nature. As it is god gave them birth in wealthy families. Let them do their scheming of astute planning on their own risk and of their own money. Let them not be allowed to raise any money from public, banks through any kind of monetary instruments. These are the enemies of the nation within portraying themselves as victim. They want to go scot-free.
Multiple structures are created involving shell companies and cross holdings. All this is done to get away from law. It is a visible scandal which we are refusing to see. We are keeping mum, sitting over time bomb, waiting for loans to turn bad, and then too thinking of a restructuring drama in a lawful and democratic manner. Isn’t it true to our Gandhian bureaucratic tradition! In other words in means, inertia has shrouded the executive who pretend to be continuously engaged, while waiting for political bosses to one fine day kick them to get going. Borrower has a vested interest to default and always show a sorry picture. In line of duty, it’s the financial institutions who are the actual wilful defaulters!
Loss of public money means nothing to the bankers! For whatever political and social compulsions, Modi Ji and his sycophant fraternity were obliged to praise banking employees for putting in extra hours in money changing. That being the only official machinery available, bankers deceived the government in its objectives, cheated the country wholesale while the wealthy scoundrels easily absorbed 20% hit but were able to retain all the cash in new currency. De-Monetization was something like a war waged on the enemy. In this war of Dharma, the bankers sided with the wealthy finding an opportunity to make a quick buck. De-Monetization did not yield that powerful a result as had been conceived. All thanks to corrupt bankers.
But that’s another topic and not as much to do with Make In India or recovery of bad loans.
Rules are made to keep the multitudes law abiding. But there are no rules for dealing with rare events, war, future technologies or nature of residual economic offences. The financial jargon is so entangled as to look complying with framework but is tweaked to fashion leakages that suit. Not only the public money is plundered, assets are laundered on a sustained basis to turn into a mountain of liability; leaving nothing in sight to recover within given framework. Such defaults can’t be dealt with ‘law will take its own course’ attitude. What they call, a ‘suo motu’, instant and voluntary cognizance would have to be taken by somebody in authority. Options would hence need to be explored, outside the framework.
It has to be pick and choose. There cannot be a generalized policy for all. Each case could be unique and demand unique solutions. But one solution that I am proposing here is easy to execute, logical and may not be vehemently opposed even by the borrower. Scope of presenting arguments on pretexts exists, but once action is initiated outside of normal legal framework, perhaps through a special act, or through some special provisions available already under law (experts would help), little choice would be left with entities sitting over astronomical amounts of loans on their books.
Borrower entity should no more be looked as corporate entity. There has to be a promoter. Apart from forensic audits, personal profiling and family histories of all people in concert would need to be studied and put together for objective conclusion. Once findings available, state would take a call on seizures, fines, winding or allowing businesses to continue under supervisory new structure. In fact, the suggestion herein suits the promoters too, if they are serious to return money to banks.
The idea is to consolidate multiple companies, listed or unlisted, where promoter or his family/associates are primary beneficiaries, stake holders or decision makers; into a single consolidated entity.
Here I present two cases which can be acted upon without delay and proposed consolidation could pave a peaceful way forward.
1. JP Group
Once a darling of investors, an elite constituent of Sensex and Nifty, Jai Prakash Industries fell from grace on removal from indexes. Index managers are smart guys keeping tab on what’s going on and what would it lead to, if an index constituent evokes doubt. Bankers should have taken cue from such developments of importance. But perhaps the rewards for neglecting the elements of risk were too high to be ignored. The triggers that onset JP’s journey into fall of grace being repeatedly disregarded, JP & Associates indulged in manipulation, diverted assets and laundered huge money into personal pockets.
On books, the group is sitting over a loan of about 1 lakh crore. Somehow it has learnt the art of not rendering its loans go non-performing for banks. Hence it has managed to portray that the intent to repay is there, while it continues to give restless time to its creditors. The listed entities are kept floating, complying with regulatory filings, reporting losses, eroding net worth and investors kept high and dry. So its not just about recovering loans, its also about claiming back for the investors and society at large, huge assets stashed away by family and friends from public eye.
In one of the Hindi poetic renderings from the epic of Mahabharata, Mahatma Vidur says, ‘Deewar mae aalaa, Ghar mae saala; Aaj nahin, toh kal deewaala’! So has been the case with JP family. As soon as Mr. JP Gaur succumbed to the pressures of new generation, everything started going astray. Now whatever had been split and given sundry names, needs to be clubbed back by consolidating all splinters into one entity – JP Group Ltd. This would demand merging all listed companies, ie, JP Associates, JP Power, JP Infratech and Jaypee Hotels along with all hidden and unlisted entities that would emerge (including Gaursons), after probe and forensic study of entire family. The presumption is: none existed before JP and whatever has been created is only out of JP; hence let everything get merged into JP. Alongwith existing assets and interests in Cement, Power, Engineering and Infrastructure, it’s the huge property and real estate base lying in varied parcels and ownerships which not only rightfully belongs to all non-family stake holders but also has the real potential to return or service all borrowed money with grace.
2. Anil Ambani Group
That Mr. Anil Ambani is the younger brother of Mr. Mukesh Ambani is not a revelation. He took his share of inheritance in a not so amicable settlement after the demise of their visionary founder father is in public domain. Well, he had every right to that claim if he did not want to play an undermined role in decision making all his life. He had a dream to outdo his elder brother in riches on his own accord. Again, he had every right to pursue his ideas and dreams, irrespective of the fact that in unneeded rivalry he branded his media & entertainment business as “BIG”. Anyhow, the means adopted by him to realize those dreams are in public domain and image in sewer. Despite having exhibited his capacity to execute large projects, as all his companies have done, his success has been very limited. He must thank the god, his stars, his father, his brother, his inherited wealth, loopholes in our law and benevolence of our political leadership, for not being in jail like the disgraced Raju of Satyam or Mr. Sahara.
Although all his companies have huge debts on books, RCOM has been a disaster. Total outstanding debt of his head is stated to be in excess of 1.1 lakh crore! My personal take is, we can be safe with Jr Ambani if we do some astute talk.
If Reliance Industries of Mukesh can be so much diverse as it stands today, with over a score of unrelated businesses under one company, why not all ADA businesses be merged into a single entity?
Presently R-Capital and R-Infra seem to be relatively strong enough to tide over crisis. R-Power and R-Defence vertical be also merged into a single Reliance ADA Group Ltd.
RCOM needs to be treated separately. There is no reason why a single family should own two telecom service provider licenses. ADA must quit telecom sector. Now that Jio is here to stay, both the brothers need to compulsorily be made to sit before empowered solicitor and to work out stake swaps to merge RCOM with RIL/Jio juggernaut with all assets and liabilities. As it is, RCOM is not able to add fresh subscribers and existing ones churning rapidly. Jio has already made a backdoor entry into RCOM through eyewash arrangements of tower, spectrum sharing and webstore infrastructure. This would take care of many a problems of all stake holders.
I have presented here-above only two of the most talked about borrowers. The problems posed by borrowers are essentially their personal misadventures for which public and nation at large cannot be made to pay. Each group has a story, both unknown and known to public. Close scrutiny can throw up insights into life and scandals, and of course solutions. So long as the moneys have not been stashed abroad, every paisa is recoverable.