How 7 Indian billionaires turned defaulters within a decade

The number of entrants in IIFL Wealth Hurun India Rich List has grown from just under 100 in 10 years ago to 1,007 today. At this rate, in five years, I expect the list to grow to 3,000 individuals. The evolution of the IIFL Hurun India Rich List is a reflection of India's economic growth story- Anas Rahman Junaid, MD and Chief Researcher of Hurun India

The fate of the failed billionaire brings to mind the opening of a famous John Lennon song; "Nobody loves you when you are down and out". The sombre and caustic prose that shapes the media narrative of failed billionaires is a far cry from the razzmatazz associated with the billionaire life. The riches-to-rags story is a different genre compared with the super-luxury yachts, the luxury jets, the private islands, and juicy gossips that adorns the well-choreographed narratives of the billionaire lifestyle. The riches-to-rags narrative is no match for the rags-to-riches anecdotes that sustain an everlasting media voyeurism. The glossy journals no longer flaunt Anil Ambani waxing eloquent on Mumbai Marathon. The Kingfisher calendar with its show-stopping models has vanished as Vijay Mallya keeps moving in and out of London courts with a harried look to stop extradition from the UK to India. The fall from the top, as the saying goes, is devastating when heights are greater.

At least seven persons featured in the first edition of the Hurun India Rich List a decade ago found a place nowadays only in the defaulter's list of banks and other financial institutions. The most famous of the dropouts from the billionaire class in the Hurun India Rich List included Anil Ambani, Vijay Mallya, Venugopal Dhoot, Rana Kapoor, Mehul Choksi, and Malvinder Singh, and Shivinder Singh. A few of them have absconded while others are caught in a web of litigations. As Hurun has recently launched the 10th edition of the report it would not be out of place to ask what prompted such venerable personalities to commit acts that made them persona non grata in the world of business and in the eyes of the ordinary folks? Not an easy question to answer.

The first edition of the Hurun India Rich List 2012 came out in the shadow of the global economic upheaval brought by the Great Recession of 2008. The Indian economy too was feeling the tremors of the global meltdown in the wake of the Lehman collapse. The Hurun India Rich List reflected the situation as 52 out of the top hundred persons in the list saw shrinkage in their wealth. Anas Rahman Junaid, Managing Director and Chief Researcher of Hurun India was candid in his observation of the then situation. This was mainly due to the 12 per cent depreciation of the Rupee against the US Dollar, which negated the appreciation in India's stock markets," he said in the report.

Although few prominent individuals in the first edition find no more a place in the latest list, Anas Rahman Junaid remains gung-ho on the Indian billionaire story. "Ten times in 10 years", is his description of the situation. "The number of entrants in IIFL Wealth Hurun India Rich List has grown from just under 100 in 10 years ago to 1,007 today. At this rate, in five years, I expect the list to grow to 3,000 individuals. The evolution of the IIFL Hurun India Rich List is a reflection of India's economic growth story."

An essay in the Harvard Business Review titled 'Entrepreneurs and Truth', (1) though dealing mainly with the habitual lies associated with the start-up world, may be of help in making some rational understanding of the reckless behaviour of those dropouts from the billionaire list. The ordinary folks, no wonder, would be numbed to learn about the brazenness of the members of the billionaire clan as well as the dysfunctional institutions that by design pretends to wake up to close the stable only after the horses have bolted. The HBR essay, largely sympathetic to the entrepreneurial class, delve into the question of what prompts entrepreneurs to dispense with the truth by drawing attention to various factors including the enormous pressure and competition.

Anil Ambani, the sixth richest person in the world in 2008 with an estimated wealth of $42 billion, according to media reports is the most famous of the riches-to-rags story in the folklores of India Inc. In the Hurun India Rich List 2012 Anil was placed at 13 amongst the top 50 with a wealth of $5.3 billion. The fortunes of Anil Ambani travelled in the opposite direction of his elder brother Mukesh Ambani after the split in the Reliance Group. The wealth of the elder sibling scaled new heights and he cemented his position firmly in the billionaire list year after the year. The fall from the top for the younger Ambani was as steep as his meteoric rise.

It would be a cliché to say that the rise and fall of AA is having all the ingredients necessary for Bollywood potboilers. The downward spiral in the fortunes of one of the richest Indians was epitomized by these words. "My net worth is zero after taking into account my liabilities. In summary, I do not hold any meaningful assets which can be liquidated for the purposes of these proceedings," Anil Ambani said in a filing submitted to the London Court in February 2020. The candid words were indeed a shock to the world. Only a few months back Anil had announced that Reliance Defence, a JV with Dassault Aviation Ltd, manufacturers of one of the most advanced fighter jets in the world commencing operations at its plant in Maharashtra. A man with zero net worth on his own admission claiming to partner for manufacturing advanced fighter jets is something that might happen only in the flight of imaginations. The book The Meltdown: India Inc's Biggest Implosions, (2) provides a meticulous account of the downfall of the Anil Ambani empire.

The fall from the grace of liquor baron and Kingfisher Airlines promoter Vijay Mallya has no comparison with the flamboyance and the rapid scale of operations that marked the rise and fall of Anil Ambani. Mallya, the seasoned businessman with a near-monopoly of the liquor business in the country, had enough and more entrepreneurial experience to grasp the risks involved in running airlines. The manner in which he had managed the airlines, the divestment of stakes in the liquor business, and the quiet departure for London rule out the possibilities often associated with business risks. The cases connected with Mehul Choksi and Nirav Modi fleeing from the country also rule out possibilities of any business risks associated with their enterprises.

A combination of factors such as the global recession, policy challenges, over-dependence on debt financing, risk takings without precautions is some of the factors that led to the collapse of the enterprises promoted by the persons involved in the dropout list. The risk appetite shown by Rana Kapoor of the Yes Bank fame was not in tune with the prudential norms normally associated with the debt portfolio in the banking sector. It may be a coincidence that the NPA profile of the Yes Bank included the ADAG companies, Jet Airways, Cox and Kings, DHFL, and others. Blaming Kapoor alone for the woes of Yes Bank may not be of much help in understanding the systemic defects underpinning the boom and bust cycles in the modern economy. The failure of the institutional mechanism entrusted with regulatory responsibility also needed thorough scrutiny to understand the gravity of the problem. For instance, many of those big names in the defaulters' list at present continued to be movers and shakers of India Inc as late as 2015. Former RBI Governor Raghuram Rajan insisting on the Asset Quality Recognition (AQR) to assess the bad loans in the banking sector was the first red signal for the Yes Bank. The turmoil in the economy following the demonetization of high-value currency notes followed by the introduction of GST exacerbated the problems of the bank. The rest is history.

The fate of the Videocon Group led by Venugopal Dhoot depends on the verdict of the National Company Law Appellate Tribunal (NCLAT).

Dhoot, Chairman and MD of the group before the board was dissolved following the initiation of insolvency proceedings, has approached the NCALT challenging the order of the Mumbai Bench of the National Company Law Tribunal (NCLT) approving the takeover of 13 group companies for a consideration of Rs 2,962.02 Cr by Twin Star Technologies promoted by the Anil Aggarwal of the Vedanta Group. According to a report in Business Today on August 31, 2021, the total amount of the default by Videocon stood at Rs 62,000 crore. Dhoot has challenged the order in the appellate tribunal by stating that he had submitted a revival package that promises to repay nearly 31,000 cr to the creditors of the group.

Malvinder Mohan Singh & Shivinder Mohan Singh among the top-50 of the Hurun India Rich List 2012 are also battling a series of charges linked to funds misappropriation. Shivinder Singh at age of 37 was the youngest person on the billionaire list in 2012.

The disappointing performance of the above-mentioned individuals, however, failed in making much impact on the spiraling of billionaires in the country. According to Anas Rahman in the last 10 years, "wealth creation has transformed into a lightning 20-20 match from a test cricket". Stating that India perhaps is witnessing the fastest wealth creation pace in history he said "IIFL Wealth Hurun India Rich Lister's added Rs2,020 cr each day for the past 10 years. At this rate, I expect India to add another 250 billionaires over the next five years and rival the USA in terms of the number of billionaires within ten years."

The fall from the billionaire list is not confined to India. The track record of the US, Europe, and Japan are also replete with many such incidents. The trial of Elizabeth Holmes, currently hogging media headlines in the US, is the latest link to the fall from the billionaire list in the US. Ms. Holmes hailed as the youngest female billionaire at the age of 19 in 2003 is now facing 12 fraud charges, according to a BBC report the other day. Ms. Holmes is facing charges of "deceiving investors and patients by claiming Theranos could detect common illnesses using a few drops of blood from a finger prick".

A Stanford University dropout Ms. Holmes founded Theranos, a blood-testing firm that was once worth $9 billion. Former US secretary of state Henry Kissinger and celebrated US four-star general James Mattis sat on the board while media baron Rupert Murdoch made an investment of GBD 125 million in the company, said the BBC report. If found guilty she could face up to 20 years in prison.

Coming back to the Indian scenario Anas Rahman Junaid pointed out the diversification of the wealth creation sectors in the country as a very positive development. "Now we have 46 wealth creation sectors compared with 19 a decade ago. Electric vehicle (EV) is one sector destined to see mega action in the coming days. Bhavish Aggarwal of Ola Electric already became the first Indian to be in the EV rich list", he added.

Financial Services, Real Estate, banking, FMCG, Food & Beverages are also expected to see further traction in the days ahead, he said. "It is interesting to note popular consumer brands such as Fevicol, Parle-G biscuits, Nirma, Haldirams, Emami, Britannia, Bisleri, Jockey, RajniGandha are owned by members in Hurun India Rich List. Nearly 60 percent of our list is comprised of B2C companies. It is interesting to learn that manufacturers of the goods in our grocery bag are members in the Hurun India Rich List," Anas Rahman Junaid said.

(Courtesy: https://www.hurunindia.net)