London-based Sanjeev Gupta is the Indian-origin entrepreneur who stormed India’s corporate world with audacious bids to buy debt-laden companies that were being auctioned as part of bankruptcy proceedings. He hasn’t won them all, but with two of the assets under his belt, he is emerging as a hot new star in domestic business, promising to invest up to $10 billion over the next few years.
Both Lakshmi Niwas Mittal and Gupta sensed an opportunity when India introduced one of its most radical pieces of reform, the Insolvency and Bankruptcy Code (IBC), to clean up the banking system. While Mittal is involved in a bitter battle to take over Essar Steel, Gupta placed his bets on at least four companies—ABG Shipyard Ltd (for ₹ 5,200 crore), Amtek Auto Ltd ( ₹ 4,400 crore) and Adhunik Metaliks Ltd (for ₹ 600 crore), and the biggest of them all, Bhushan Power and Steel Ltd (for ₹ 19,700 crore).
Of these, Gupta has won Amtek Auto and Adhunik Metaliks and secured funding for the two, but he has come under severe scrutiny from banks when he placed a bid for Bhushan Power. A committee of creditors disqualified Liberty House after it failed to provide critical information on funding arrangement despite repeated reminders. The move cast a shadow on the credibility of Gupta and his Liberty House business empire spanning commodities, energy and banking across five continents.
“In my opinion, (we should be) welcomed with open arms rather than with questions. We’re not taking money from anybody but using our own money. Where are you coming from, where is the money from—why are there these questions?" Gupta told Mint in an interview on Wednesday.
Liberty House also ran into trouble with Section 29 (A) of IBC when banks found that it owed $2.8 million to Exim Bank. Section 29(a) bars entities linked to insolvent companies, wilful defaulters and anyone with a non-performing loan from bidding for stressed assets. This clause led Liberty House being declared ineligible to bid for ABG Shipyard and Amtek Auto until it settled these outstanding dues. Subsequently, Gupta settled the Exim Bank dues.
“We are relatively new to India, so these questions are asked," he said.
Liberty’s grand plan for India comes with an investment commitment of $5 to $10 billion, Gupta said. The company is also bidding for Castex Technologies, Metalyst Forgings and Amtek Ring Gear—all subsidiaries of Amtek Auto—at National Company Law Tribunal.
The Gupta Family Group (GFG) Alliance, a loosely linked collection of the family’s various business interests, closed last fiscal with $15 billion in revenue, the company said. Gupta said GFG had so far not taken on any significant long-term debt, despite buying out major steel plants in the UK and Australia over the last decade and most recently, placing a bid for Rio Tinto’s aluminium smelter in Dunkirk, France.
“Historically, we’ve never taken on debt. It’s only now, with the India acquisitions, that we are looking at taking on long-term debt," said Gupta.
“We will go with the typical leverage ratio of 70-80% debt and the rest as equity. Banks in India are in no position to lend with their balance sheets shrinking," Gupta said. “So all of our funding is external right now."
There is also a perception that Gupta is closely associated with the promoters of these distressed firms and some bankers have been afraid that existing promoters of distressed companies may tie up with Liberty House to regain control of assets they lost through bankruptcy.
Gupta strongly denied this: “With the amount of scrutiny going on in India, anybody dreaming of doing this has to be crazy. Details are scrutinized so much, and no information is difficult to source today. We have zero involvement with any promoters."
Sunil Srivastava, a former deputy managing director at State Bank of India, summed up the perception about Gupta aptly. “Sanjeev Gupta doesn’t have too many accounts in India and operates in the UK and other countries. Inside India, he is an unknown commodity trying to make an entry," he said. “He doesn’t have an established record in India, and people here don’t know too much about him. But if he hadn’t brought in upfront commitments from banks, he would not have been allowed to participate (in bids for distressed assets)."
Gupta maintained that he was not taking a plunge into India for short-term gain. “We’re at the two ends of the spectrum. Either we buy very mature assets that are very good or we buy distressed assets which will be expanded and de-bottlenecked," he said. “For us, this is a generational business and not about short-term wealth."
The GFG Alliance owns the Wyelands Banks and is in the process of buying out the UK subsidiary of Nigeria’s Diamond Bank. The banking business, Gupta said, is what has helped finance their growth.
“We look at alternative ways of financing," he said. “What we have done so far is mostly off-balance sheet, self-liquidating, secure and ring-fenced financial options, with no repayment risk or open debt."
The GFG Alliance is not a single corporate entity. Assets within the alliance are individually held by family members, in trusts or directly. The banks are held in a trust structure, Gupta said, while Liberty House is held by him personally; Simec—the energy and natural resources arm—is held by his father.
There is no external investor, except in Atlantis Energy, which is listed on the London Stock Exchange.
As the battle to win distressed assets rages on, Gupta is setting up a permanent base for the group in Mumbai, which it lacked so far.
“It’ll be either in Worli or Nariman Point, where the major industrialists are," he said. “I’m nostalgic about Nariman Point… but we’ll be shortlisting an office this week."