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https://youtu.be/h79WHcDvs_I

I am joined by Natarajan Srinivasan, author of The Great Revival. It is about the CG powers comeback.

So, the question of course is, what is CG power —to those of you who may have tuned in late, as they say — and why are we talking about it? So let me start there, Mr. Srinivasan. So, CG power, of course, is Crompton Greaves, but when did it become CG power? What is the transition? And then, there was a big shift in ownership, and something led to it— the previous owners of CG power, that is the Thapars stepping out and the Murugappas, who you represented, coming in. So walk us through that period of history, recent history.

Thank you Govind, first of all thank you for again having me here.

My pleasure.

Just to give you a background, in 2015 there was a demerger of original Crompton Greaves. The consumer electrical business was spun off, which is a listed company even today, called as Crompton Consumer Electricals, and then the promoters divested that entire stake to a private equity. The residual company was called as CG Power and Industrial Solutions.

It had only three businesses: railways, motors and then the power systems business. Power systems is actually transformer and switch gears. So both listed companies, and then, for all practical purposes the promoters got out of the consumer electrical business.

I mean some kind of an indication that probably there were problems even at that point of time. Otherwise, this entire sale if you look at, was sold, you know, the private equity picked up the entire stake at the share price of 90 rupees. Today it is 250 or 260. And then, they sold the entire thing. and then they were supposed to manage the residual company which became CG Power and Industrial Solutions.

Even here the promoters had their holdings and then they were running the company. Between 2015 and 2019, over a period of four years, subsequently you will know, I think a large amount of money was diverted from this enterprise. So this unit became sick, gradually it deteriorated.

In 2019, a whistleblower sent a complaint to the management, to the board, alleging some kind of malpractice. The board got a wind, and then the wind of what was going on. And if I remember right, on 19th August 2019 the board wrote a 35-page letter to the stock exchange, self-disclosure saying that we are not comfortable with the account that we have earlier disclosed, something may be wrong, the liabilities may be understated, profits may be overstated. So, we have appointed an investigating agency to get into all the details.

So therefore, we want to put the entire exchange on record. And then this sent shockwaves. After this disclosure letter, I think one of its rare kind, the board itself coming forward and saying something is wrong, then the company went in and there is a course of investigation followed. By the time the financials further deteriorated and then the company became an NPA, then bankers declared the company as a fraud account and reported to RBI.

Bankers really took charge of the company at that point of time, in early 20s or even early late 19, 2019 itself they took charge of the company. They appointed a concurrent auditor, therefore the entire accounts were frozen. So, 2,600 crores was owed to the Secure Creditors, and therefore then the bankers actually wanted to, because the company was very important from the national point of view because some of its products go into the infrastructure and then electricity build up etc.

They were wanting to bring in a promoter, who has got management bandwidth, who has got governance, and who has got cash to support. So, they were looking for and then they approached Murugappa group. Murugappa group after some preliminary ideas, they evinced interest.

Then there was a switch and after some negotiations, some offer was made and then there was a switch challenge. The bankers said, you know, this is an offer from one of the company promoters have made. Whether anybody was interested, anybody was interested to bid and nobody bid.

Because there are number of reasons, if you see that kind of situation that prevailed at that point of time, it was very scary. Then Murugappa succeeded in the bid. Then they were allowed to take over the company under an RBI mechanism, RBI stressor mechanism.

It had certain covenants, I'll just briefly touch upon. You have to, the new promoter coming in must own 51% of the equity, entire board has to be changed, and then all key managerial personnel and those involved in any of the, mentioned in any of the reports also will have to go. It is under this framework, on 26-11-2020, Murugappas took over the company.

They acquired 58% equity for a value of 800 crores. And then I was appointed as the Indian CEO of the company. And then other members also joined and Mr. Vellaiyan Subbiah became chairman of the board. I'll stop here.

Yeah. And it's interesting because this is the time when most of the world would not even have noticed that this was going on, because we were in the thick of COVID.

Absolutely.

So, how did all of this happen? I'm obviously on Zoom, but how else did this?

So, COVID was, because there was a lot of, first of all, you know, all the, there are nine plants of CG, none of them are functioning, either due to COVID or due to lack of funds. There was no working capital because 750 crores was due to the vendors. So, no vendors were willing to supply to anything.

If you want to say, you can say because of COVID also we locked them. So, completely it was there. And then there were movement restrictions.

You could not just like that go anywhere. Even in the office, the day I came, there were hardly about 10 or 15 people, where people were allowed to sit at home, and then there has to be social distancing. It made things more difficult and complex.

So, a few minutes on the company and the state you found it in. Now, this is a company that was with the previous owners for decades, several decades. What in your understanding caused this sudden, you know, change in, let's say, the financials?

Because I am assuming that the promoter at that time would have intended to correct things at some point. But that didn't happen, obviously, because either the problem, the hole was too deep or the problem was just insurmountable.

Since I have spent about five years and then gone into greater details, I can say this now. At the point of stepping in or even before taking a decision, this would not have been known. I am being very open with you.

So, this company was a market leader in many of its products for about, almost for about 75 years. And competing with global giants like ABB and Siemens. It was always profitable.

And all the plants, nine plants located in India were actually, you know, mostly constructed through accruals. And they had overseas acquisitions also were made out of the profits made in India. I think single reason, I would say that, you know, the amount of money that had been diverted for a period of three, three and a half years, from 2016 to 2019, it was so large.

It was close to about 4000 crores. And, I think the company could not withstand that kind of cash outflow being taken out. Both in terms of, you know, it is long term loans and short term funds— working capital funds were taken away, some assets were sold— so, so many things had happened. This is one.

Second thing is, whatever the company did in terms of overseas, and overseas acquisition, etc., they did not do well. Either due to management failure, or lack of attention, or the way they were structured. So, cumulatively these two really brought the downfall.

The parent company was actually the main company which was supporting all the operations. The large part of the diversion took place in the parent company. And then, when operations of the parent company came to a halt, it became a non-performing asset under the RBI norms.

And also because, then they found out that it was a fraudulent activity and declared a fraud. Nobody wanted to ever touch the company. The company could not borrow one rupee from the market.

No vendor were willing to come and supply. So, that was, I mean, that hit the final nail in the coffin.

Right. So, and I am going to come back to the whole, you know, the idea of governance, but at a conglomerate level. Since India is conglomerates and family owned, there must be some takeaways from this, because finally, this was the case of an owner, promoter, trying to support some other businesses, which may have been in trouble. And not, sort of, maybe keeping enough in the parent business or the primary business. But I will come back to that.

So, tell us about the time that you walked in and what was your first task?

So, actually, I got only about 7-8 days notice from the Murugappas to take over this job. You know, I knew that it was a sick company, there was some problem. And I didn't give me enough time, you know, when I wanted to say anything.

And you have never been in manufacturing? I mean, you have been in the group, but you have been running the finance?

I mean, I have been manufacturing. In fact, NBFC was a short stint. I was very comfortable in manufacturing. Even prior to that also.

So, before, you were in Cholamandalam Finance and…

Then, you know, I was actually, the first joint position was CFO of Carborundum. Then, see, in the Murugappa group, the finance director's job is not finance job. It is more profitable, the profit control, profit planning, acquisition.

And then, there are about 28 businesses of which, about more than 20 of them are in manufacturing. And I was in the board of tube investments for 10 years. So, I am fairly conversant with manufacturing.

Earlier, in the earlier stints…

So, Carborundum is grinding wheels and…

Grinding wheels, abrasives, then ceramics, etc. Prior to that, I have set up sugar plants, power plants, you know. Then, I am fairly comfortable.

In fact, I found manufacturing to be easier than NBFC. (chuckles) So, coming to this question, so…

You said you had 7 days of notice.

So, therefore, the 7 days notice, I just joined. And then, the day I joined, you know, because of Covid, nobody was there. And it took me about 15-20 days, 2-3 weeks to…

Because you could get information on mail or you can do some video calls. So, that is the way you have to pick up. I really had the shock, actually.

I thought whether this is the worst blunder of my life. Because, you know, just quickly, you know, 6 or 7 things what was facing the company. 2,600 crores were due to secure creditors.

700 crores were due to unsecured creditors. Employees dues about 45 crores. So, CG had given guarantees to secure some of the loans given to its overseas subsidiaries.

And those loans have become bad and the value of guarantees outstanding was 1,300 crores. So, those lenders outside India, they also wanted CG to pay up this money. This was on the liability side.

Then there was a 1,000 crore tax demand. Everything, when this notice came, when the disclosure came, all investigators just phones for the company. Income tax department did its own part, you know, they did something.

And they put 700 crores tax plus interest, etc., coming to about close to about 1,000 crores. Then, because, you know, during this investigation, the Union of India, actually, Ministry of Corporate Affairs, they came to know that this was fraud, etc. They moved a petition to National Company Law, NCLT, asking, got a direction that last five years accounts of this company have to be rejected.

And they have to be reopened, recast, re-audited. Because, you know, earlier also, the last two years, the auditors expressed a disclaimer. They said they will not be able to express any opinion on the affairs of the company, true or false, or rejection, etc.

So, this was the thing which was outstanding. And then, COVID was in full flow. And there was no money in the company. So, this is what, initially, the position was. And plans were not working. No nil working capital.

Because of its NPA. Company was in NPA and also a fraud account. So, you have to address several things.

And then, it was an investigation by SFIO, CBI. And then, they were, in the office, they were the majority people to sit. When you, morning when you go, they will be sitting in the other rooms.

They will expect you. So, this was the background under which, you know, I just walked in.

So, what was your first task? I am assuming, one is, you were arranging all this money, including from your parent company. Talking to banks and creditors. What else did you…

So, I tell you, first, you know, initial reaction was whether I should go back. Because I thought, you know, my BP was going up. Then, I thought whether it is all worth it, whether it is possible at all.

Then, you know, professional pride, this, I thought, this may be my last assignment. Then, what will happen, etc. I picked up some courage.

Did more meditation and then picked up some courage. And then, one thing I realised was that I should not get stressed up. I have to pick up the quality of handling stress without getting stressed.

So, I used to write every morning, 10 times, 15 times. You know, the, and handle stress without getting stress. Handle stress without getting stress, like that. And gradually, I was able to develop some confidence. So, first 30 days, I was able to settle the security task. You know, 800 crores TI brought in for its equity. 600 crores immediately, 200 crores little later. On the strength of TI bringing in 800 crores, state bank came forward to give another 800 crores. With a corporate guarantee of tube investments. So, 1600 crores was available to me to settle off all these matters and then restart the plan. Within 30 days, I had hard bargaining at 43%. Of 2600 crores, 1000 crores I settled. 600 crores I will pay, 400 crores for a period of 4 years. Immediately, the moment security creditors were settled, I asked them to remove my NPA tag, they removed. They gave me a big tonic.

I became a standard asset. Then I spoke to all the vendors. Then I assured them that, you know, I will settle the payment immediately.

And then I asked them to again restart supplies. And then I assured them, that within 90 days, I will settle the payment. And over a period of time, I will reduce it to 60 days.

And I also assured them that a thing of that will never happen in future. Because of the sound financial planning and principles by which the Murugappa group runs the business. So, within 60 days, I settled the vendors, unsecured creditors

And vendors, one of the main raw material is copper.

Raw materials, components, you know, everything. You know, steel, copper, regular packing.

The copper is almost 15-20% is…

Correct. Correct. Correct. Then, you know, packing materials, everything, even including stationery, nobody was paid. Then employee dues also I paid.

You said 45 crore was pending?

Pending, then I went to the board and also apart from 45 crores, I made them agree to next payment of 2 years bonus. Whether they are not eligible, plant was working, etc. Whatever is the minimum bonus.

I think because they were impacted on two accounts. One is on account of COVID. The second is the stress whether the job will be there.

So, they were worried a lot. I wanted them to have some money on hand. So, that also I paid.

You know, I told you, we acquired the company on 26-11. By February end, I paid off all this. So, 30 days, 60 days, 90 days.

Then, the moment I paid everything, vendors started coming. Then, SBI gave some money. Then, I requested them to provide some working capital, which they also gave.

So, production started. Within 30 days, I could start production and all the plant. So, this was the activity for the first 90 days.

So, January to March, you know, I was very keen to get the production started. So, first quarter actually we reported, that is 2021, January to April 2021, we reported 1000 crore turnover, which was never seen in the last 7-8 quarters. There was lot of confidence came.

Enormous amount of communication. Even though there was COVID, I vaccinated myself and then had the thing, you know, mask. Then I extensively travelled.

I travelled to plants and then addressed all the employees, union. Then I told them, here is a chance for you. You can redeem the entire company and then your own life.

And then you will go into the history of having created a new CG. And then how it was, I showcased the Murugappa values, how 30,000 employees of Murugappas were taken care, they will take care of you. I was not very fluent in Marathi and Hindi.

Therefore, I used to have a translator. But it worked. So, unions, I told them, we have a responsibility, you can become actually a talk of the town.

That is the kind of work you can do. The employees actually, because there was CG pride, most of them were in the company for second generation or third generation. So, they felt there is an opportunity.

I told them, you don't have to worry about anything about the past. Any legacy, everything, you send it to me. Your job is only production, meet the customer demand, address customer's calls.

You have to come back. You have to make the customers believe that CG has come back. And it worked wonders.

The entire team rallied around. Few things which I did actually also sparked. For example, I organised vaccine camps.

And then permitted people to work from home. Your convenience, you come, but you are responsible for this job. I don't want to police you.

Like that I took a liberal attitude. Then third thing, they were worried about their PF. The company was running its own trust.

I said, not to worry. I will send you a ledger statement of your entire balances. You verify and tell me.

Within 3 months, I will transfer it to a government account. So that you will be safe forever. I don't want the company to...

The company has got better job to do than managing PF trust. So, these things I did. The employees actually helped build morale.

Let me pick up one segment of the product mix. Let's say, low tension motors. In which there was at least one third market share.

Now, this product along with let's say, traction motors for railways or transformers and switchgear. They disappeared from the market and then they came back. When production stopped.

My question really is, in the time period that you lost the market, and then go back into the market to get it. That must not have been easy, because others would have moved in.

And your dealers would have been, let's say, trying to find alternatives and so on. And of course, the customers themselves.

So, it was difficult. But, we operate in 3 businesses. Motors, traction motors is railways. And then power systems.

Both railways and power systems are tender based. Railways actually you have to supply to railways business only. Only you get an enquiry, you supply.

Railways had backlisted CG. Because you could not supply many of their orders earlier. And they also knew that you don't have a balance sheet financially.

Because there was a recasting issue. So, I went and met them. I said, I have put money and recasting is going on.

And TI itself, the promoter also has supplied for railways. And then you give me a chance. In respect of old orders, They wanted to levy a penalty of 50 crores.

I said, I will pay it upfront. And now my working happens, we will start working. So, once I did that, within couple of months, they included me for future orders.

In railways actually, once you are approved as a vendor, Your quality is good, you will get orders. And it is not easy for anybody to just let that go in. Approval process will take 2 years.

So, therefore, I was a quality supplier. So, within 2 months, I paid the penalty. I said, everything is going on.

They understood what we are doing. Then they started giving me orders. Motors actually-

Motors are a lot of retail.

CG was the largest producer of motors. They produce about 1 lakh motors per month. The next second biggest is only about 30,000 from ABB.So, we are a large volume player. So, when I met with the dealers, They were all very happy.

And the context there is that your key competitors are multinationals. And CG is obviously a home grown brand.

There are also some local players are there. But not in this scale. So, when I said that even when the company was not doing well, Some of them actually gave materials.

They directly paid some of the dealers. We will pay for the material. You just manufacture and give it to us.

Like some production was going on. So, when I met them, everybody was happy.

And dealers too have been with the company for generations. Exactly.

So, this is what they told me. We are there for 4 generations. We have been benefited.

It is our time to help the company. Whatever you tell us, we will do. You start giving, we will manufacture, we will distribute and we will be there.

So, we came out with a project called Project Regain. Regain lost markets. Regain customers.

Regain geographies like that. We went whole hog. And then production was ramped up. From 27% market share which came down, we moved up to about 34% in about 18 months. Because of motors. Because of quality. And because of goodwill. Goodwill enjoyed by the company for years. At least 30-40-50 years. And then ability to meet the customer.

So, what would have been the gap between the product going off market and then coming back?

As luck would have it, it coincided with COVID. For 2 and half years, everything came to a stop.

There was no demand etc. And when we wanted to make a comeback, Then post-Covid demand helped.

But you are saying effectively for 2 years plus there was no...

There was a big decline And very marginal sales.

I am going to come back to the product. You talked about liabilities. But on the asset side, CG has always had a lot of real estate and land.

All the factories belong to you. It sits on land belonging to the company.

Those lands you cannot do. There was one large property. They wanted to shift the plant And realise 1000 crores cash.

It shows the kind of need for cash at that point of time. You take money not for expansion. You again take it back somewhere.

Prior to my joining, Phase 1 and Phase 2 were sold and about 600 crores were taken off. Phase 3 was lost spending. And the contract was so onerously structured.

For every month of delay, you have to pay 10 crore penalty, on the entire value—Phase 1, Phase 2, Phase 3 put together against 490 crores. When I took over, already about 180 crores of penalty was there. That was the only hope for me. I wanted to release that 490 crores Bring it here for the revival of the company.

Then I had to fight the contract. I had to fight the builder. This is an unreasonable term.

After 18 months, I have some legal background. I told him, don't take me like an earlier Interim management. For me already there are some 10-15 cases are there, this is the 11th case.

I will go to Supreme Court. I didn't give it up. Finally after 18 months of hard bargaining negotiation, we don't have time to get into minute details.

It's in the book.

I told him that real estate is looking up. Instead of fighting with me, you sell it to me and make money in your business. Otherwise I will ensure that the agreement itself is struck down as void.

Based on some illegality. I met his lawyer also. I told him what are the points on which I am looking at.

Then he came to the negotiating table. He asked for 100 crores discount and settle that 425 crores. I told him within 30 days you have to complete the transaction.

He agreed. I got 425 crores. This is the second year. And second year, our working everything went up. I asked for an unconstrained business plan. The team was a gung-ho.

We produced 500 crores PBT plus these 400 crores. Then things changed.

Let me come back to the product— low tension motors, or motors in general, traction motors, transformers, switchgear. All of this was a market where the product need was more or less similar or consistent over the years.

My question is, from the time you took over and as you looked ahead, what was changing in the marketplace for some of these products? What was changing in customer's requirements?

In motors there was no change. In motors generally Indian standards are there. The bureau actually describes it. There is generation 3, gen 4, gen 5 motors like that. Scale was taking up. It was nothing unusual. If you want to go to gen 4, it is transparent. Anybody can do. I can do, ... And any other, small scale, regional player also can do.

It's not a big thing. There was not such an epoch-making changes. Some changes were taking place but it was manageable. Transformers, switchgear, first two years things were very bad.

Market was bad. I told our team that you don't have to take loss making orders. Instead of that you work on your internals.

You bring down your cost of manufacture, improve your design. We had a programme with a Japanese consulting.

You work with them to just set your house in order. Don't take one single loss making order. There the problem was government orders.

Either you will not get your money or execution will be delayed and they won't compensate you. I said I don't want anything of that sort. I don't want Indian situation.

I made 100 crores in motors, 50 crores in railways and 100 crores loss here. Instead of that I will pick up your non-operating loss. Because of your reduced capacity.

They worked on this. For two years it was not a good thing. But the team worked hard to set their position.

Then they were ready. But post-COVID, things changed. Demand for transformers went up.

Because of energy transition. I was the first one to note that. The way I was using enquiries.

Because of solar powers. Everything was going up.

I immediately went to the board. This company had 50,000 MVA capacity. Either it got destroyed or removed.

We are only 17,000. That is immediately doubled to 35,000. Demand is coming.

In fact one of the ... said, how are you so bullish about this? Just a feel from the enquiries and what I am seeing. That is the time Elon Musk also made a statement.

There is going to be a global shortage of transformers. Then data centres. Then it never took off, it never changed actually.

So this was the change demand for transformers, switchgear and the entire power auxiliaries because of the data centres and then energy transition. Government's big push to get into 500 gigawatt of renewable power. That gave a different outlook.

Railways was neither a change nor a deterioration. They were going on. Something like Vande Bharat keeps coming and going.

Railways' big thing was Kavach was a new thing. Safety. We acquired another company in the third year.

Which was already approved. There were only four companies which were approved. Our entry will take time, therefore, we acquired that company. We took a 60% stake. We entered Kavach.

Big push came only for power. I think for next 10 years the power sectors will continue to have so much.

At the time you left which was July 2024 what was the revenue split between these three?

Still revenue split was motor was higher. Motor was about 55%. Power was about 30%. Railways was 15%. At that time acquisition came. Probably now power will equal motor. Railways will still be 25%.

Areas like transformers, there has been a lot of talk, particularly in the last few months, even as more data centre capacity has been announced, that transformers business will be seen, because that's the less glamorous part of the world.

I would say not only transformer then switch gear then the entire transmission. Look at it this way. Earlier the grid in India was prepared was set up only for thermal power generation or large projects 5000, 1000, 2000 etc.

Now when this renewable thing came 20 MW, 30 MW, 40 MW, 50 MW solar, everything so the grid itself has to be completely changed to manage these kind of inflows from these small plants. It is happening worldwide. Governments actually plan 500 MW has to be done from renewables they have already said 10 Lakh crores they have set apart for transmission.

Similarly when you want to have a substation, when you have to have a small solar plant, etc. you must have a substation A to distribute. Substation will require transformer as well as switch gear. This is one domestic part based on the demand etc. all these players will have a very good play. Ukraine at some point will have to be reconstructed. 3000 km of grid has been destroyed. Global players will know what is happening in Gulf. There is going to be a huge number of work for all these players.

What was CG's exports roughly?

Power will be about 1000 crores. I am not following the numbers now.

I am saying all at the point that you left.

Power will be 1000 crores, because recent public information, 900 crores from single order for transformer for US data centre they have taken. That will be huge. Constraint is capacity to manufacture and execute.

How many plants make transformers? You said there are 9 plants.

There are about 3. Now they are setting up a 4th plant for a large size. From 17,000 I have made it to 35,000. Now they are taking it to close to 90,000. Capacity.

So you are saying 3 out of the 9 plants are making transformers.

Then only 4. There are 2 plants.

This is now the fastest growing segment within the CG power portfolio driven both by global as well as Indian development. If you were to look back a couple of questions. One is to do with governance as a whole— this was part of a conglomerate, and once again it is part of a conglomerate, and both cases family owned businesses. What is the lesson for everyone—investors, founders—when they manage businesses and the reason you are a conglomerate is because you are trying to manage cycles. Some businesses may do well in some cycles, others may not.

Obviously the idea is that you support each other but when you over support or divert funds then things go wrong. I am assuming that is one lesson. What are some of the lessons that you can...

I think one thing is whether it is governance or integrity. Whatever happened in CG happened between 2015 to 2019 much after the new companies at 2013 came in. The new companies at 2013 strengthened the role of audit committee, role of independent directors, and apart from that, SEBI came out with LODR, and then called for so much of disclosures.

I can't imagine how these kind of diversions can take place with so much of controls and so much of system, within a period of 4 years and then, it did not come to light for a period of 3 years at least. So, unless there is integrity at the top, I don't know whether this will work. After this, companies where I am still involved I have told them that don't take things for granted.

So, if a subsidiary has taken, there will definitely be an increase in the level of borrowing. In this case, subsidiaries have borrowed money without the knowledge of the parent. What kind of... people have not really gone in.

I can't understand. Auditors must have found out. Auditors simply put a disclaimer and in the first 2 years they had their own auditors.

So one thing, however well you plan, systematically you want to just plug the loopholes and then do something, I think your system is not able to prevent. You have to move. Maybe I don't know what can happen.

In this case, this is what has happened. Several other cases you can see after ILFS, Yes Bank, Lakshmi Vilas Bank, DHFL, all these are cases where system has been overturned. Promoters have found their way.

You were also on the advisory committee for ILFS.

I was on the board post fraud. I was there to rectify the fraud.

Which was chaired by Uday Kothar.

So therefore, governance they have strengthened a lot— the rule of audit committee etc. Either the people who are in charge they did not do their job or how do you address lack of integrity?

I think this is a big question. If there is a lack of integrity and then he wants to somehow find out a method, manoeuvre, outmanoeuvre whatever the systems are there, it is going to be tough. So, this is what I feel in this case.

It is not merely to say this. Governance has failed definitely. But I think, to what extent the independent directors, one thing is in audit committee why it did not find out all this? It is again a clear question for thought. Similar it happened in ILFS. ILFS rating from AAAA it came down to D in 3 days.Normally from AAAA, AAA, A- etc. it came to default. Rating agencies did not see.

Here also the same thing. So, I think the answer lies in trying to behave in honest manner and then maybe some qualifications have to be prescribed depending upon the size of the company the fit and proper criteria will have to be applied better. That's what I would say in selecting the people.

Businesses go through bad times. Let's say, this was a stand-alone company—maybe a legacy founder or a new founder—is faced with falling market share, COVID, really events which are beyond one's control, almost like a force majeure. What could they have done differently?

Assuming there was no intent to cause harm to the company's balance sheet.

This is not the case of falling market share, or because of issues of COVID. So, there are several ways by which you can restructure yourself. You anticipate in business you must have at least a feel of what is going to happen next 2-3 years. I always used to have a cash flow for 18 months. Stressed cash flow. When I am likely to have a deficit, I will have. If you go to the bank and tell him that I have a problem after 12 months I want to restructure. I want to do something. I want to augment my capacity. Bank will help you. You won't tell him that I have defaulted. I am coming here. They are helpless. They would like to take action against you.

So, in this case, if there is an issue—money was required elsewhere or if there is a problem—either they should have raised some equity, or they should have raised some debt, or they should have sold some of the assets. So, so many options were available. Nothing was attempted.

Simply, blatantly money was taken from here left, right and centre and then that killed this main company's operations.

Right. So, you are saying that one is stress test for any company in general in a world where things can go up and down quite dramatically now, including now. So, one is stress test 18 month cash flows.

What else?

So, then there are innumerable amount of things you can do. For example, right now if you take, supposing gas is not going to be available then you will have to think of declaring a layoff or whether you can alternate alternate fuel is available. Then you know, because of this supposing your payment is likely to get impacted, you are likely to be a default, you can approach, banks will consider because this is a very genuine case because of externally, you know, this is not available.

So, thing is, you know, sit down and then working out stress test scenarios and then how do you build the cash flow gap, and what are the options. So, you can close the plant for some time or you can operate at a reduced capacity so many things are possible. So, nothing of that sort has been attempted.

In this particular case. So, one of the things that you talked about is how you in the beginning felt that you wanted to go back because it was looking too difficult and your own challenges including of high blood pressure and I also noticed that you were working from 3.30 am till 9 pm. So, I mean that's a fairly gruelling schedule. So, how did you manage that?

That's one thing, you know, in a turnaround, within first 4 to 6 weeks you must firm up your thought and give a communication. You must have clarity. Clarity will not be there but you have to come to some view.

You have to make some assumptions, and you can do course corrections and then speed is of the essence. Nobody is going to wait for 3 years, 4 years if you have not done anything, finished. So, you have to make a decisive impact.

This is one. Second is, within 4 weeks you have to communicate what are you going to do, and what is the expectation. The entire whole population—not only the company employees, vendors, other regulators— everybody will be expecting from you.

They will expect some clarity, and employees would like to know what is it that you are expecting from them. Now, this is one. Second is, this kind of stressful companies will have hundreds of problems.

So, you must be available to them. Supposing somebody takes time to communicate to you for 3 days, they will get fed up. So, I said, you know, my lines will be open.

So, I took a very aggressive schedule. Within 2 years, I think, I should finish off all this and then I delinked. Production should go on right from day 1, and if there is, I am reasonably connected in the markets, in the financial markets people know me.

Once my restructuring was completed, people were willing to give me any money. So, subject to demand, everybody will have to go on. So, I said, you know, before every mail from me, I made it a point that I will reply within 4 hours maximum.

So, morning, before morning, I go to office my mail inbox will be empty. And also everybody, whoever I wanted something to be done what I am expecting them to do that day, next day, etc. will be communicated.

So, this culture people felt, this guy is working hard, let us try to cooperate with him. That kind of feeling came.

So, you said hundreds of things. Give us an example of something you had to deal with, which you would have not dealt with, let's say in your earlier role in Cholamandalam Finance or many of the other companies that you were in.

Investigation agencies, dealing with investing agencies, very tough. So, you will get a call at evening 6.30. They will ask you to come in the morning 9 o'clock, next day morning. So, you will have to go and find a ticket, COVID time.

So, I was really finding difficult my health. I didn't want to get into this. You get sucked up in health.

Then I told them also. I earned their confidence. Whatever information you want I will give it only from SAP.

I don't have anything else. I will give you access to SAP. I will put a parallel server.

You want anything, you take it. But at 9 o'clock if I go, then you will call me only at 3 o'clock. I am not suitable for this.

Please give me some mercy. So, that was a very tough experience. But then most of it was handled by my CFO.

And any other unusual kind of areas or issues which you had to intervene which again you would have not done perhaps?

So, I tell you in terms of challenges, recasting was a big challenge. Because, you know, there were subsidiaries. Subsidiaries' accounts were not available. Then many of the employees were left. Boards were not there. Auditors were not there.

So, we had to reconstruct the accounts. Only through COVID, one phone and get the message. We have to do it aggressively.

Everyone thought the recasting will take about 3 years. I could complete it in about less than 15 months. So, recasting was a big challenge because there was no precedent.

So, without a board, the board approved accounts, the auditors will not look at the accounts. And nobody was willing to join a company which was under investigation into the board. After trying out various things, finally I convinced some of my employees to be on the director, on the companies as directors assuring that, you know, we will compensate if there are any issues, etc., we will take care of them. Covered them under the corporate DNA policy. So, that was a big… every item was a new thing. They are dealing with the builder.

It's the Kanjunmark property in Mumbai.

A lot of people told me, don't be aggressive. These guys are very difficult, you know. But I didn't give it up. So, then 1000 core takes the amount. Finally, we knocked it off. We quashed the entire demand.Then there was a BMC building. 80 crore, the current BMC in our building, you know, on the CG house. It was 80 crore demand. Therefore, they wanted us to remove the kit. Then I fought the demand and then finally all the entire 80 crores was quashed. The lease was renewed. Today, the building is being developed with Rahejas.

In Kala Ghoda?

No, in…

Oh, this is the one in Worli?

Worli. Very posh property. Brilliant property.

But it's a new building and they are knocking it down and rebuilding.

But, you know, currently it's only 80,000 square feet has been built. As per the new guidelines, you can build 4 lakh square feet. So, CG will get, after the post new building, will get 2 lakh square feet from the 80,000 square feet.

Their investment will be very marginal.

So, it will continue to be a commercial property?

A commercial property. So, all this dealing with BMC matters, etc., I have to buy the book and understand the entire thing and actually fight the system. It took me some time.

So, now let me ask a slightly broader question. Now, this is a company which came to you, in a manner of speaking, to the Murugappa group. RBI had already decided that this is the path they are going to follow for its resurrection.

When you look around you and as you look back over the years, do you feel that there are many companies like this? When I say like this, I don't mean necessarily with fraud being the trigger. But companies which are maybe not well managed, have products which have potential in the market, could do more, maybe financially they are weak and therefore they need injection.

But after injection, can they manage the same fund better? So, when you look around, do you think there are gems like this, if I could use that word?

So, I can't say whether they will become gems, but there is a huge…

Or potential gems.

There are huge non-performing assets in this country. But you know, a large part of NPA has been written off by the banks over a period of time. They have written off in the books.

But they exist in some form or the other. If those have to be turned around, you know, today, I mean this IBC was a big epoch-making legislation. But IBC then later on, you know, it was settled down because it originally wanted to be a solution provider within a period of 12 months. But you know, many cases got delayed beyond 2 years, 3 years, 4 years, etc. Then the RBI mechanism was actually found quick. Then there is surfacing.

Then there is a debt tribunal. So, if there is a mass movement just to bring up or develop all the non-performing assets, I think there is plenty of opportunity. Country will be, economy will be on a steroid. So, but all these things, you know, one thing is when there are promoters, no disrespect to anyone, they will try to cling on. They would like to cling on, etc. The moment there is a change and the person putting money or who has given some concessional terms, they will try to bring up, revive the assets.

I think that has to be done on a big scale. I even wrote a letter to the authorities that, you know, this RBI mechanism can be treated and can be used to bring up lot of assets. I think it's a good opportunity available.

And you can see this around you when you see some products in the market or some engineering companies.

There will be hundreds, you see.

They could be turned around.

Every case may not create 20x returns. The fact, you know, if you are viable and then if you become profitable, it is good for the economy, good for the nation. I think that can really happen.

Right. So, last question. So, you were about 62 when you wrote this book as well.

Age wise, I am 68 now. 67 maybe.

When you went in, you were 62. Correct. So, this was a very high intensity engagement and assignment. Once you finished or you stepped down in 2024 July, did you feel like you were now missing the action and you wanted to get back?

I am basically a very intense person. So, it was like that. It is a problem which you have to manage.

I am used to work. I used to get up at 4 o'clock every day. That has been my style.

And then I used to work very intensely. In America, even till 85, even the Fed Governor is 85. But in India, after 60, generally you are not employed.

So, I am trying to spend time. I am on some boards and some companies. People are asking for help.

If there is an opportunity, I will definitely take it up. Maybe I can do a few more years. That is one of the reasons why I came back to Mumbai.

Lovely speaking to you. Thank you so much for joining me today.

Thank you so much.