Companies
Turning steel into fool’s gold: The reverse alchemy of Sanjay Singal
Summary
- After setting up Bhushan Power & Steel in 2002, Singal allegedly spent the next 15 years turning the company into a laboratory of financial deception.
Before Nirav Modi became the face of bank fraud in India, Sanjay Singal at Bhushan Power and Steel Limited (BPSL) had seemingly perfected the art of turning steel into fool's gold. The sheer numbers in the case filed against him by several investigative agencies are staggering – 157 shell companies and 33 banks duped of ₹47,700 crore in total. The scale of the fraud was such that investigators needed to create special teams just to track and verify the paper trail.
The Bhushan empire was launched by Brij Mohan Singal, who started a business selling door hinges and rail track fasteners in the 1970s. It grew with a few smart acquisitions, and by 1993, when Bhushan Steel & Strips (distinct from Bhushan Power & Steel) listed, it had earned a reputation for quality.
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But in 2002 Sanjay Singal, one of his sons, decided to set off on his own, leading to a split and infighting. This continued until 2011 when a family settlement led to a truce, with Brij Mohan and his son Neeraj retaining the legacy business.
Sanjay Singhal set up Bhushan Power & Steel (BPSL) and expanded it rapidly. Over the next 15 years he allegedly turned his company into a laboratory of financial deception. Stories of how one man's ambition created a multi-crore hole in India's banking system are still whispered in Delhi's corridors of power.
Brazenness behind the numbers
The numbers, however, tell only half the story. The other half is the sheer audacity and complexity of Sanjay Singal’s alleged efforts. By 2015, even as accusations of malfeasance were swirling around the company, his personal wealth was soaring. His net worth was estimated at $1.1 billion in the Forbes list of billionaires that year. He owned properties in many high-end neighbourhoods of Delhi and Mumbai, and a large collection of luxury cars. Well-connected with the well-heeled in Delhi society, his parties, attended by top Bollywood stars, were the talk of the town.
By then, BPSL was already one of India's largest steel producers. In 2013, the company’s sales were ₹8,670 crore and net profit was ₹571 crore. Unnoticed at that stage was another figure – net debt – which had climbed to ₹24,810 crore. The company was growing aggressively, setting up steel plants and prospecting for coal in distant Australia.
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The funding came primarily from banks. Combined with Bhushan Steel’s debt of ₹31,000 crore, this made it one of the most indebted industrial groups in India. By 2014, a crash in steel prices caused profit to collapse to just ₹62 crore, even as the company was spending more than ₹1,600 crore a year in interest payments alone. Its stock price went into freefall.
By now, alarm bells were going off with banks screaming for repayments and investigative agencies, including the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) and the Serious Fraud Investigation Office (SFIO) on the case. In 2017, State Bank of India dragged the company to bankruptcy court and soon, worms started to emerge from the can.
What a tangled web we weave
In court, the agencies showed how BSPL used fake documents to obtain letters of credit, created fake vendor payments, diverted funds to other companies and took loans from multiple banks for the same purpose. At the heart of the alleged fraud were multiple shell companies sharing common addresses, registered across several states with employees and relatives as directors.
The companies had no real business operations and were merely used to open multiple accounts in various banks, the agencies said. Money moved through these shell companies, creating a complex web of transactions. Documents later filed in court mentioned round-tripping of funds, over-invoicing of imports, under-invoicing of exports, and manipulation of letters of credit. There was also the obligatory stock-market angle, with the shell companies allegedly used to manipulate the market by creating artificial trading volume and engaging in circular trading to manipulate stock prices.
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Eventually, the ED arrested Sanjay Singal in 2019. The CBI also filed criminal charges against him, alleging massive bank fraud. BPSL went into insolvency and was acquired by JSW Steel for ₹19,350 crore in 2021 in one of the largest insolvency resolutions in India. Needless to say, banks took a significant haircut on their loans. The original Bhushan Steel also met a similar fate, with Tata Steel buying the bankrupt company from its committee of creditors in 2018.
While Bhushan Steel also faced several charges, the Supreme Court in September ordered the release of Neeraj Singal in a money laundering case filed by the ED over an alleged ₹46,000-crore bank fraud, on the grounds that procedure was not followed in his arrest.
Criminal proceedings against Sanjay Singal are ongoing, but the vast Bushan empire that his father set up lies in ruins. Its rise and fall traces a common pattern in Indian business, that of overreaching expansion funded by aggressive bank borrowing, eventually leading to collapse.
