I have no intention to flee: Manoj Gaur, Executive Chairman & CEO, Jaypee Group

"We are taking a detached view of our businesses and selling off whatever we can to raise funds"

Malini Goyal
  • Updated On Mar 20, 2016 at 09:47 AM IST
Balance sheets of some of the biggest conglomerates in the country are stressed. As per Credit Suisse’s 2015 update on India’s 10 most indebted corporate houses (the first report was done in 2012) titled “House of Debt”, the Jaypee Group, with interests ranging from engineering and construction to power and real estate, had gross debt of a little over Rs 75,000 crore in fiscal year 2015.

Some $200 million (roughly Rs 1,328 crore at current exchange rates) in foreign currency convertible bonds (FCCBs) of group company Jaiprakash Power Ventures has been restructured by signing a “standstill agreement” with bondholders ($150 million of flagship Jaiprakash Associates is due only in 2017). According to the Credit Suisse report, almost two-thirds of the group’s debt had already been downgraded to default by credit assessors, and almost 80% of the debt was classified as “high-stress” (as against moderate stress and low stress). The situation has since improved. Jaypee Group executive chairman and CEO Manoj Gaur, 51, has been on an asset-selling spree which, he says, began in 2012 and which has brought down the debt burden to Rs 38,000 crore.


For instance, in 2015, the group completed the sale of two hydropower assets to JSW Energy at an enterprise value of Rs 9,700 crore; and, in February-end this year, UltraTech agreed to buy Jaiprakash Associates’ cement units in six states at an enterprise value of Rs 16,500 crore. The debt-repayment road, though, is still long and bumpy. In an exclusive interview with Malini Goyal, Gaur, who of late had turned a media recluse, talks candidly and emotionally about having to sell some of his “family jewels”, how he landed in the debt mess, the lessons learnt and the pain it brings. Edited excerpts of Gaur’s side of story:

Is this the worst phase in your life as an entrepreneur?

Yes. This is the worst I have seen. I have been through many tough phases. The first one was in the late 1980s. I was 26. We were EPC (engineering, procurement and construction) contractors and due to challenges in the economy we just couldn’t get a loan. The second tough phase was in 1997 when about $100 million of our receivables were stuck in Iraq and we never got them. But this is the worst that I have seen. We are firefighting to reach the shore. I have no choice but to grin and bear it.

What lessons have you learnt from the current crisis?

The biggest lesson is that a 70:30 debt equity ratio isn’t what one should do to fund growth. I will reverse the ratio in my future projects. At our worst, our debt equity ratio was 4:1. Another lesson is to take projections of growth put out by experts with a pinch of salt.

When did you first get a whiff of the coming storm?

In 2012. I realised that I had stretched myself too thin. I began to feel the stress. Our FCCB series 3 was due for repayment. Rupee-dollar exchange rates had become adverse. The economy in India had started to slow down. History might judge us seeing only the results but as a company, we as promoters initiated disinvestment way back in 2012. In 2013, if you remember, we sold off our Gujarat cement plant to UltraTech Cement. Since then every year we are trying to sell off assets to bring down the debt. But we have faced challenges. In December 2014 two cement plants in Madhya Pradesh were to be sold to UltraTech for Rs 5,400 crore. Successful consummation of this deal would have kept JAL ( Jaiprakash Associates Ltd, the flagship), going without hiccups, but circumstances beyond our control brought the new Mines and Minerals (Development and Regulation) Act 2015 (MMDRA) into play, which stopped corporate action pertaining to change of hands (of assets) in the mineral-based industry (a clause in the Act barred the transfer of mines that were not allotted via auctions). Since the regulatory approvals (including sanction of the Bombay High Court) could not be received prior to the ‘long stop date’, the scheme of arrangement for transfer of the two cement plants at Bela and Sidhi to UltraTech was revoked. With the coal problems, everybody lost interest in thermal plants (the group has a few projects in India). We sold off our hydropower projects, our family jewels, in July 2015.

How difficult has been the decision to sell off the assets?

These (the assets sold) have been some of the best assets we have had. But I know that in tough times only good things go. That pain of selling some of our best assets will be there for life. We are today where we were in 2004. The business has been reset to 2004 levels. Our staff count, at 90,000 at its peak, has come down to 30,000. But I also see the flip side. Something will come out of this that will help us build our future.

Tell us about the debt burden the group has and how you plan to tackle it?

Let me break up different businesses to help you get the picture. JAL, which is our holding company, has a debt of Rs 30,000 crore. After the Rs 16,500 crore UltraTech deal, to be wrapped up next week, it will come down to Rs 13,500 crore. In power, we had a debt of Rs 22,000 crore. After selling off the two hydro projects and the Bina plant (the thermal power unit was sold to JSW Energy), it will come down to Rs 18,000 crore. In the Yamuna Expressway project, we had a debt of Rs 9,000 crore. With bulk land sale of Rs 3,000 crore, it is down to Rs 6,000 crore. We today have a debt burden of Rs 38,000 crore. In six months, it should come down to Rs 30,000. I would be comfortable with that kind of debt. We are taking a very detached view of our businesses and selling off whatever we can to raise funds. Our constant effort has been how not to give pain to banks. I have no intention to flee.

Looking ahead, what would be the core of Jaypee Group?

At the core we are an EPC company. And we will remain that. We will also manufacture cement. Right now we are sacrificing (cement units) because it is the only monetisable asset we have that we can sell. If our land parcels were easily saleable, I would have disposed of them. So the external environment is such that I have had to sacrifice some of the critical assets that we had.

Now when you look back, what went wrong?

In 2002, we had a turnover of Rs 1,800 crore and we were a profitable group with interests in hotels, hydroprojects and also EPC contracts. We had around 8,000 people. Then the economy began to see accelerated growth. I was around 35 then. And I felt if I don’t do it now, then when will I do it? So one by one we started growing the existing businesses and getting into new ones. Thermal power plants; the Yamuna Expressway where we were to build five cities of 1,200 acres each, approvals for which were coming as part of the project. Between 2005 and 2007, we took three rounds of FCCB borrowings of $700 million. We expanded into new businesses — roads, coal. We were betting on the future of the India story — the infra story, not the consumption story. I think I got carried away with my passion for growth and the confidence that nothing could go wrong with the India growth story. That it would only get strengthened when UPA II returned to power.

Who would you blame?

There were multiple factors, many out of our control. We all thought UPA II will push the India growth story even harder. But we were wrong. In UPA II, not much work happened. And we got hit by a range of external developments. Real estate saw a downfall we hadn’t witnessed before. With an adverse order from the NGT (National Green Tribunal) on the Okhla Bird Sanctuary impacting real estate developments in the vicinity, we had to shut down work for two years on our big project on the Noida-Greater Noida Expressway (area around the sanctuary was notified as an eco-sensitive zone). By the time it got cleared, the real estate sector was slowing down significantly. In Madhya Pradesh, we were awarded a coal block after competitive bidding. And then that coal block was cancelled. So a Rs 10,000 crore, 1,320 MW power plant, which should have been profitable, is now making losses for no fault of mine. This mine was not part of the list of mines on the CBI list for scrutiny (the CBI was probing a ‘scam’ in coal block allocation to public sector and private firms). So these events were beyond the control of the promoter.

When you read headlines about defaulters, wilful defaulters and non-performing assets (NPAs), what comes to your mind?

The mind says don’t believe the country’s growth story. The heart says believe it. I have always followed my heart. And I continue to believe in the India growth story. But right now I need to do everything I can to tackle the debt problem first and not give pain to our bankers. On the issue of NPAs, wilful defaulters et al, this is what I want to say. For every borrower who pays back, there will be some who will default. But you have to assess why and also look at his intention. Were there circumstances, or was it the business that had turned unviable, or was there a clear diversion of funds? And this should shape the action of the government. If you put the CBI behind every case, it will make who is sick even more sick.
  • Published On Mar 20, 2016 at 09:36 AM IST
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