RBI Defaulters List: Meet the
Top 10
You thought Vijay Mallya owes banks money? Kingfisher is actually small fry
compared to Usha Ispat, Lloyds Steel and othersWhen we started investigating this story two months ago, one thing we didn’t anticipate was a situation in which we’d find ourselves using ¯\_(ツ)_/¯ while writing about the top 10 defaulters in India, as of December 25, 2015. (That’s a shruggy in case you didn’t know.)
Check out their names below.
Top 10 Companies/Rs Crore
In the first part of this series, Newslaundry introduced key elements of RBI’s Wilful Defaulters and Defaulting Borrowers List, which places corporate bad debts in the banking system at Rs 5 lakh crore as of December 24, 2015.
These are accounts against which banks have not taken any legal action. In banker-speak, they are non-suit filed accounts. Of these accounts, only Rs 1.08 lakh crore are labelled as wilful defaults.
It is not normal practice the world over to put out bank defaulter names. Our case is different since in India, the banks involved are state-owned and many of the companies are public sector undertakings. Add to that the size and seriousness of the NPAs in the banking system, and public disclosure is a crucial way to put pressure on the powers that be to expedite important reforms in the way banks classify and treat defaults as well as in the way the legal system is geared to handle bankruptcies.
Newslaundry sent a detailed questionnaire to all the above companies to get their side of the story. None of them have responded yet. The story will be updated if and when they do. We also reached out to Reserve Bank of India spokesperson Alpana Killawala by email, text and phone calls. We are yet to receive a response from her too.
Steel and the metals and mining sector feature prominently on the list of top 10 defaulters. Heavy industries and mining have generally been at the centre of scandals involving political corruption, due to the number of licenses and government approvals required. The owners of these companies — like Usha Ispat, Malvika Steels, Lloyds Steel and Prakash Industries — have seemingly benefited from political and regulatory forbearance when it comes to their debts.
Of the 10 companies, four are public sector undertakings: Hindustan Cables, Hindustan Photo Films, Prag Bosimi and Malvika Steel (which was bought over by SAIL from Usha Group in 2009). Both Hindustan Cables and Hindustan Photo Films are declared terminally sick, and the former may shut down soon. Prag Bosimi Synthetics is the only industrial venture of public-private partnership in the Northeast. It started operations in 2012 after remaining shut for a decade. PSU companies have defaulted the most to public sector banks and financial institutions, which means the taxpayer loses money twice over in case the PSU shuts down.
Mismanagement, therefore, is evident when it comes to both the lenders and the borrowers. It is not hard to imagine the lax standards followed when public sector banks lend to public sector companies, as well as the tolerance shown for their defaults. It also points to the subjectivity of the wilful default classification as none of these companies are labelled wilful.
Zoom Developers defaulted on Rs 3,843 crore, out of which Rs 137 crore are labelled as wilful default even though Zoom Developers owner Vijay Chaudhary was charged by the Enforcement Directorate for diverting bank loans for realty projects in Europe and according to some accounts, he has been absconding since 2014. Zoom features on CIBIL’s list as the top-most wilful defaulter (suit-filed accounts). Why, then, are some of Zoom’s accounts non-wilful defaults?
Another anomaly is Kingfisher India, which has been dubbed a wilful defaulter by various banks but features on the RBI list as just a defaulter. Kingfisher’s bad debts amount to Rs 3,259 crore. Again, these are non-suit filed accounts. As newspaper reports cite, Kingfisher owes in excess of Rs 9,000 crores to a consortium of lenders led by State Bank of India (SBI). Which means Kingfisher owes about Rs 12,000 crore to banks.
Lloyds Steel and Cranes Software don’t have any criminal cases against them. However, reports suggest that Lloyds was listed as one of the top wilful defaulters in Maharastra in 2002. Uttam Galva took over the loss-making company in 2012 for a stake of 58.3 per cent and it was renamed Uttam Value Steels in 2013.
Cranes Software International, in 2010, was going to be delisted from the National Stock Exchange due to continuous late filing of their financial statements. It is still traded on the Bombay Stock Exchange. Cranes Software Co-Founder Asif Khadar has stated that most of its business comes from exports and has suffered due to the global recession following the 2008 financial crisis. Seventy per cent of Cranes Software’s debt is labelled wilful in the RBI list.
Then there is the case of Prakash Industries whose promoter Ved Prakash Aggarwal and Director Vipul Aggarwal were arrested in August 2014 for offering bribes to get credit from Syndicate Bank. According to a 2012 story by Tehelka, Ved Prakash Aggarwal’s brother JP Aggarwal ran Surya Foundation, which is an NGO that conducts poll surveys for the Bharatiya Janata Party. Prakash Industries was raided by the CBI for selling coal in the black market.
However, the name on the list that is the cherry on the default cake, in every possible way, is Usha Ispat. Usha Ispat owes banks and lending institutions almost Rs 17,000 crore and has been defaulting at least since 2005.
The company is owned by Usha India Limited, which also features on RBI’s list and has defaults worth Rs 2,828 crores. The group is family-run and owned by brothers Vinay Rai and Anil Rai. In 2002, the Central Bureau of Investigation raided the premises of both the brothers for allegedly duping financial institutions of over Rs 100 crore. Newspaper articles from the time painted Vinay Rai as a Mallya-esuqe figure, with a personal net worth of Rs 5,338 crore.
Usha Ispat’s defaults as noted on the RBI list are as recent as March 31, 2013. Effectively, the company has been getting loans and defaulting on them for more than a decade despite CBI raids, FIRs and The Serious Fraud Investigation Office initiating proceedings against its promoters. Only Rs 5,093 crore of Usha Ispat’s total defaults are labelled as wilful according to the RBI’s list. Usha Ispat owes more than half of the total default sum to LIC at Rs 8,619 crore.
A Financial Express report, headlined “How the Rais roll in money but won’t pay back”, states that the CBI suspected the Usha Group of taking “money from banks and financial institutions by showing fake bills for purchase of machinery from its own front companies”. The article also mentions Rai’s political clout.
Interestingly, Usha Group also owned Malivika Steel, which defaulted on Rs 3,057 crore. Malvika Steel was acquired by SAIL in 2009 during the UPA-II regime. The steel plant is located in Jagdishpur, in Amethi district, and has defaulted on loans since 2007. All of its loans are owed to either General Insurance Corporation, Mumbai, or Life Insurance Corporation. According to a Hindu Business Line report, the Modi government pulled the plug on the plant’s revival in 2014 and it may be up for sale now -- Rs 300 crore had been sunk into the project in the United Progressive Alliance (UPA) regime. We have to wonder how much of a part Rai’s political connections played in Usha Ispat staying under the radar for as long as it has, especially since the company seems to be about as substantial as Casper the Friendly Ghost.
Our emails to Usha Ispat’s director Amit Kumar bounced back. According to the RBI’s list, Usha Group’s office is in New Delhi’s Mohan Industrial Area. Our calls to the office yielded no result since these numbers are no longer in use. When we visited the office, we were told that the Usha Group no longer operated there. As of its most recent filing, in 2014-15, Usha Ispat has had zero revenues over the past two years. The company has no web presence. Its office is registered in what appears to be residential complex in Pune. Newslaundry has also posted a letter with questions pertaining to its huge default and is waiting for a response.
Update: Cranes Software has responded to Newslaundry stating that the total amount due to Indian banks, as provided in the company’s audited published balance sheet, is Rs 649.24 crore. For more details read here.
The authors can be contacted on Twitter @MnshaP and @garimachitkara
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