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Year in Review: Top 10 corporate events and crises India Inc faced in 2019

From money-laundering allegations to payment defaults, arrests and a high-profile suicide, India’s corporate houses and their executives witnessed it all in the year 2019. Some corporate honchos were unseated from their perch at the helm of companies, while at least one ousted chairman was reinstated to his position after three years of protracted corporate battle.

Here are the top 10 events and crises that India Inc witnessed in 2019:

The DHFL crisis

The DHFL crisis first came to light on September 21, 2018, when DSP Mutual Fund sold DHFL papers way higher than the traded rates, sparking the speculation that the non-banking financial company (NBFC) could be facing liquidity issues.

In January 2019, Cobrapost claimed that DHFL promoters had lent money to ‘shell companies’, allegedly linked to the promoters, who had used this money to buy assets abroad. By May, the NBFC stopped acceptance and renewal of fixed deposits and also stopped renewals and premature withdrawals from existing fixed deposits. Later that month, it informed the BSE that it would not be able to furnish the audited standalone and consolidated financial statements for FY19 within the time stipulated under Sebi norms. On June 4, the company failed to pay about Rs 900 crore worth of interest, prompting rating agencies to downgrade all of its commercial paper to ‘D’ (Default) amid liquidity concerns.

On December 2, NCLT admitted the insolvency plea moved by the Reserve Bank of India (RBI) against DHFL for defaulting on interest payments for external commercial borrowings (ECBs) availed of by it from State Bank of India. DHFL’s liabilities as of September 2019 were to the tune of Rs 92,715 crore.
ALSO READ: In a first, RBI moves NCLT seeking insolvency proceeding against DHFL

The Karvy fiasco

One of the biggest shocks for India’s corporate houses in 2019 came in the form of the Karvy fiasco. Earlier his year, investors had filed a criminal case against Karvy Group executives, and Abhijit Bhave, chief executive officer of Karvy Private Wealth, a division of Karvy Stock Broking. It was alleged that Karvy Private Wealth transferred funds to builders, causing losses to its clients. Karvy clarified that it did not cheat investors and that the losses happened due to unfavourable market conditions. On November 22, Sebi said Karvy moved clients’ pledged shares (against which they receive margin funding from the broker) to its own account via off-market deals and transferred Rs 1,096 crore to Karvy Realty Private Limited between April 1, 2016, and October 19, 2019. Several Karvy clients complained to Sebi about money and securities not coming to their trading accounts. Karvy allegedly misused client accounts without informing them, or reporting to the depository or the stock exchange.

Karvy Stock Broking has around 1.2 million clients, of whom 300,000 are active.

ALSO READ: Karvy Stock Broking gets interim relief from Debt Recovery Tribunal plea

The PMC crisis

On September 24, 2019, customers of Punjab and Maharashtra Cooperative Bank (PMC Bank) woke up to a shocker and learnt their bank had been put under ‘directions’ by RBI for six months. This meant that the central bank had practically taken over the bank’s operations. The RBI said PMC had underreported its non-performing assets (NPAs). It put withdrawal restrictions on the bank’s account holders after finding alleged irregularities to the tune of Rs 4,355 crore due to diversion of money to infrastructure firm HDIL. Several PMC depositors have staged protests in Mumbai. At least 10 depositors have died since the alleged scam came to light.
ALSO READ: Deposit Insurance Corporation sees Rs 14,100-cr claims amid PMC crisis

Gautam Thapar’s exit from CG Power

In May, YES Bank invoked the pledge on Gautam Thapar’s shares in CG Power and Industrial Solutions. Three months later, the board of CG Power removed Gautam Thapar as chairman, days after informing the exchanges that the company was hit by an accounting scandal. The liabilities of the group had been understated by over Rs 1,600 crore for 2017-18. The following month, Sebi debarred Thapar from accessing the capital market for a number of alleged irregularities, including diversion of money.
ALSO READ: CG Power case: Look out circular issued against ex-chairman Gautam Thapar

The Essar Steel case

Essar Steel owes Rs 54,547 crore to its creditors — financial and operational creditors combined. The National Company Law Tribunal (NCLT) on March 8 approved the bid submitted by steel tycoon Lakshmi Mittal-led ArcelorMittal for a takeover of Essar Steel. However, it faced many hurdles from Essar Steel’s Committee of Creditors (CoC).

On December 15, the Supreme Court set aside a National Company Law Appellate Tribunal (NCLAT) order that had put different classes of creditors — financial and operational — on a par. The apex court ruling paved the way for ArcelorMittal to implement the resolution plan. This is considered one of India’s most high-profile insolvency cases.
ALSO READ: Gruelling battle for 865 days: The making of Rs 42,000-cr Essar Steel deal

Cyrus Mistry reinstated as Tata Sons chairman

More than three years after the dramatic boardroom sacking of Cyrus Mistry, NCLAT on December 18 restored him as executive chairman of Tata Sons. The tribunal held the appointment of N Chandrasekaran as executive chairman illegal. However, the tribunal said the restoration order would be open after four weeks, the time allowed to Tatas to file an appeal. Mistry was sacked for alleged ‘non-performance’ and for group’s dismal financial performance during the time he was at the helm of affirs.
ALSO READ: Tata vs Mistry: NCLAT restores Cyrus Mistry as chairman of Tata Sons

CCD owner VG Siddhartha’s suicide

The death of Cafe Coffee Day promoter VG Siddhartha sent shock waves across the business community in India. Two days after he went missing, Siddhartha’s body was recovered by the police from a river on July 29, 2019. In a letter Siddhartha mailed the senior management of CCD, he laid out in clear words his struggles with a “serious liquidity crunch” that in turn had led to extreme pressure from lenders and a private-equity investor.
ALSO READ: VG Siddhartha’s wife to IAS officer: Who are the CCD board members?

Jet Airways chairman Naresh Goyal’s resignation

Naresh Goyal, a former ticketing agent who went on to build one of India’s biggest airlines, stepped down as chairman of Jet Airways India Ltd on March 25, after caving in to pressure from creditors. Goyal, once one of India’s 100 richest people, quit after Jet Airways fell victim to the emergence of budget carriers offering rock-bottom base fares. Adding to Jet Airways’ woes were a depreciating Indian rupee and surging oil prices. The harsher competitive environment forced Jet Airways to seek multiple taxpayer-funded bailouts.
ALSO READ: Naresh Goyal moves court seeking lifting of travel ban; govt to oppose plea

Subhash Chandra’s exit as Zee chairman

Media baron Subhash Chandra stepped down as the chairman of the board at the company he founded three decades ago. On November 5, Chandra’s son, Punit Goenka, was reappointed managing director and CEO of Zee Entertainment. Chandra’s resignation came after his family saw its stake in the company falling to 5% amid a series of mistimed and expensive infrastructure bets.

Chandra’s investment companies had borrowed heavily from mutual funds and NBFCs to fund road and renewable energy projects. The family had pledged Zee shares to obtain these loans but was forced to sell and repay after lenders threatened to offload them in the market in case of a default.
ALSO READ: After Subhash Chandra’s exit from Zee, acid test awaits son Punit Goenka

Singh brothers’ arrest

Embroiled in multiple legal cases, former promoters of pharma major Ranbaxy, Malvinder Mohan Singh and Shivinder Mohan Singh, were arrested in October for allegedly causing Rs 2,397 crore worth of loss to Religare Finvest. In the past few years, the Singh brothers had been in the news for all the wrong reasons. They had been accused of siphoning money (around Rs 472 crore) from Fortis Healthcare, and for their legal tussle with Japanese drug major Daiichi in recent times. Fortis had also written to Sebi earlier this year seeking the initiation of legal proceedings against the brothers, including arrest, to recover dues of Rs 472 crore.
ALSO READ: Ranbaxy to Religare: A snapshot of legal cases involving Singh brothers

Source: Business Standard