Usha Martin: Family Drama, Bankruptcy and Revival
Created on 22 Oct 2020
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Corporate stories have enough drama to offer, especially if a company goes bankrupt. But who doesn't like twists? In this blog, we are sharing a story which not only involves bankruptcy but a turn-around as well! And yes, it involves enough family drama. So, read on and have fun while getting informed.
This story is about a well-known company which suffered a lot of financial trauma with family disputes running parallel. Usha Martin, unlike the other companies which were declared insolvent, has a unique storyline. Let's see in detail what exactly happened.
History and Growth of Usha Martin
Every story has a flashback which is crucial to understand the current situation. So, let's travel a few years down the memory lane and have a look at the history of Usha Martin.
Established in 1960, Usha Martin was one of the leading steel producers and wire rope manufacturers in the country for a long time. The company underwent the incorporation process in the year 1986 under the name Usha Beltron Ltd.
Since its inception, the company had been seeing immense growth and was elegantly walking up the ladder for the past 50 years. Some of its manufacturing units are set up in Ranchi, Hoshiarpur, Dubai, Bangkok and UK.
Despite hard work, it was also the joint effort of the family that brought the company to the top. Basant Kumar Jhawar, his brother Brij Kishore Jhawar and his son Prasant Jhawar along with the company's MD and his Nephew Rajeev Jhawar, took the company to great heights. While the family jointly held 51% of the stake, the rest of the retailers held only 49% of the stake.
The Debt Burden
Usha Martin had a huge load of debt on its balance sheets. These debts were a result of the long-standing working capital borrowings along with other debts and credits put together. As of 2018, the company's debt stood at 4650 crores. The company's MD Rajeev Jhawar, along with other board members, worked towards bringing down the debt of the company. However, the creditors never came to a concise offer to offer a haircut, demanding the company to pay the entire amount. This ultimately forced the country's notable steel maker to go in for the sale of assets.
One of the biggest, out of NCLT insolvency requests, invited bids from various industry giants. The company was planning to sell its steel business in a bid to pay off its debts. Big bidders for the same include Vedanta, Tata Steel, JSW, etc.
What seemed to be a notable step in the history of the company, came to an end when the Tatas were given the deal under a 5-year contract. Tata Steel through Tata Sponge, which is a subsidiary unit, was to take over the unit presiding in Jamshedpur for a cost of 4600 crores.
While the entire takeover was to be finished by the end of 2018, sparks developed between father and son.
The Start of the Feud
Despite the deal being on the right track, what was once the company's greatest strength, soon became the reason for its decline. News of differences among the key personnel of Usha Martin started making the news.
In December 2018, what seemed to be a family problem, soon became a sensational news headline, thus affecting the reputation of the company. Brij Kishore Jhawar and his brother Basant Jhawar who were working day and night as the founding members of the company, reached the Enforcement Directorate to sort out their differences.
Basant Kumar and his son Prashant Jhawar were against the sale of the wire and steel business and were also unhappy with the management of the MD. They alleged that Rajeev Jhawar had introduced personal greed and destroyed the company's ethos. They blamed Rajeev's mismanagement for the inefficiency and poor condition of the company's finances.
This family feud soon came to an end when Basant Kumar Jhawar was forced to leave the company, as the majority of the stakeholders backed the MD, Rajeev Jhawar. The voting during the EGM (Extraordinary General Meeting) favoured Basant's nephew as he failed to garner the minimum 75% support required. The board appointed Bajpai in his place.
Despite this, the fight continued. The case filed with the ED brought the spotlight on 190 crores worth of immovable property. Following this, the case was transferred to the CBI, which immediately filed a case against Usha Martin and its MD Rajeev Jhawar. The FIR was filed under the prevention of corruption act in October 2020.
There hasn't been much development on the issue since. However, the share market seems to be highly volatile as earlier this year, it saw a fall of more than 6%.
Considering this, we will have to wait to know how the proceeding will be taken forward.
Future of Usha Martin
With the unfortunate trail of events, it is natural to ponder upon the future prospects of Usha Martin.
As per the MD, Usha Martin, following the sale, will divert its major focus towards strengthening its business. The company will be working towards strengthening its rope business, as a result of which the company is hoping to secure a place among the top three wire rope players.
The current slowdown followed by the COVID-19 pandemic has surely affected the top line of Usha Martin. However, the company seems to be confident and optimistic about the days to come.
Usha Martin, at large, will invest in the domestic market. It is also expecting a decent profitability growth in the following three years.
This corporate drama, as interesting as it is, is still missing its final climax. However, with the markets opening up, it seems to be under process, and sooner or later we will hear it.
All we have to do is wait and see if Usha Martin can fulfil its objectives and how the CBI case proceeds. We can only hope for a positive end!
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