Author: Makarand Gadgil, Aniek Paul & Cordelia Jenkins
Publication: Livemint.com
Date: September 9, 2012
URL: http://www.livemint.com/2012/09/07222600/The-man-who-fell-to-earth.html?atype=tp

On the third floor of Insignia Towers, an almost abandoned eight-storey building in Kolkata’s information technology hub, Salt Lake Sector V, the curtains are drawn and the lights switched off. The tower, dwarfed by its glass-and-steel high-rise neighbours, is the registered office of around 60 companies that constitute the Abhijeet Group, headed by Manoj Jayaswal, a mining baron named by the Central Bureau of Investigation (CBI) this week in its ongoing probe into irregularities in the allotment of coal blocks.

In Nagpur, Jayaswal’s hometown, and whence the Abhijeet Group was founded, the news of the businessman’s downfall has been greeted with surprise. “We have been hearing about his bubble is going to burst any time soon for last two-three years, but it seems it is only getting bigger and bigger,” said a Bharatiya Janata Party MLA (member of the legislative assembly) from Nagpur, who did not want to be named. While CBI has raided offices of the group’s companies, Jayaswal has studiously avoided reporters clamouring for a statement.

Jayaswal wasn’t at his home in Nagpur when a Mint reporter went visiting and a polite security guard, who took the visiting card, said he would pass it on to Saab.

CBI’s charge is one of cheating and criminal conspiracy. The agency claims that Jayaswal is a director of three of the five companies that it says misrepresented themselves by making false claims in their applications for coal blocks with the connivance, or at least without the due diligence, of public servants.

His friends and relatives are also among the accused. According to CBI, the companies connected to Jayaswal are JLD Yavatmal Energy Ltd (which it says is jointly controlled by Congress member of Parliament Vijay Darda’s family and Jayaswal), Jas Infrastructure Capital Pvt. Ltd (a subsidiary of the Abhijeet Group) and AMR Iron and Steel Pvt. Ltd, headed by Jayaswal, his two brothers and Devendra Darda, according to the agency. A report by the government’s auditor claims the government lost Rs.1.86 trillion by not auctioning the coal blocks.

On Friday, Jas Infrastructure and Power, one of Jayaswal’s companies, finally released a statement expressing its surprise at the complaint filed by CBI (it said it was yet to receive a copy) and denied that the group suppressed any information. It said the “allegations of misrepresentation, suppression, or ineligibility are completely wrong and misconceived”.

Jayaswal’s image may have taken a beating, but it wasn’t always thus. In August 2011, at a function at Rashtrapati Bhawan to launch a glossy coffee-table book, Global Indians, Jayaswal was glowing. His company had just been praised by the then president of India, Pratibha Patil, for its contribution to the industrialization of the country. He posed for photos in a bright pink tie and matching pocket corner, the president on his left and his friend Vijay Darda on his right.

“I am honoured to take my place in an exclusive league of emerging masters who will further take India to a higher pedestal,” Jayaswal said in a statement issued at the time. “I firmly believe in the India growth story and would be partnering in it. We shall be offering the best infrastructure and products to the nation and its people so that the next phase of growth is secured in record time.”

The Abhijeet Group’s own growth was secured in record time too, although the group’s website itself is sparing with numbers on revenue and profits.

Then, numbers can never tell the entire story of Jayaswal’s rise.

Jayaswal was born in 1955, the second son of a business family in Maharashtra’s Vidharba region. His octogenarian father, Basant Lall Shaw, founded Jayaswal Neco Industries Ltd in 1976. The company started life as a small-scale iron foundry unit in Nagpur and is now the flagship company of the Neco Group.

Basant Lall’s family are natives of Bihar, who subsequently migrated to Kolkata. He worked as a scrap dealer, but sensed an opportunity in the 1960s when Steel Authority of India Ltd’s Bhilai steel plant opened. Basant Lall moved to central India and set up a trading firm. He subsequently entered manufacturing with Nagpur Engineering and Casting Co., which became Jayaswal Neco. In the late 1970s, the company won a big contract to make railway sleepers.

In due course, Basant Lall’s three sons entered the family business. Initially, Jayaswal didn’t have much say in Jayaswal Neco and so he planned to branch out on his own, said a close associate, who spoke on condition of anonymity. Another associate, who too didn’t want to be identified, remembers the split differently. He says that in 2007, a documentary was shown on Jayaswal’s 50th birthday that credited him, but not his brothers, with the company’s growth.The rest of the family, including Basant Lall, walked out of the function in a huff, the associate said.

The family’s business interests were eventually separated between Jayaswal (on one side), and his brothers and father in July 2008. The first associate claims Jayaswal got little or nothing out of the settlement and continues to fight his father and brothers in various courts over the split.

Jayaswal Neco is still headed by Basant Lall and two of his sons, Arvind and Ramesh. The two, CBI says, are also directors of one of the companies named in the complaint, AMR Iron and Steel (the company was allotted a coal block at Bander, Maharashtra, in 2009). Media speculation that the name is an acronym of the three brothers’ names could not be confirmed, but their collaboration on a new project would be surprising, given that people close to the family say Manoj had fundamental differences with his family. A “split was inevitable as temperamentally Basantlalji, Arvind and Ramesh are different from Manoj—like chalk and cheese,” said Asoka Verma, a former senior executive of the Jayaswal Neco Group. “While Manoj is a go-getter and a man in a hurry, the others in the family are a conservative lot,” Verma added.

There may have be more than just a difference of temperament behind Jayaswal’s decision to quit the family business. Jayaswal’s closeness to the family of the Congress party’s Vijay Darda, has provoked suspicions that politics might have played a part in the split. Members of the Darda family own shares in an Abhijeet Group company, and Jayaswal and the Dardas are on the boards of two of the companies CBI has named in its complaint. Business associates, politicians, journalists and bureaucrats who spoke to Mint agreed that Darda played a crucial role in Jayaswal’s rise to fame, but they differ on the details.

Some argue that Basant Lall, who believed in keeping politicians at arm’s length, disliked Manoj’s proximity with Darda. The two were known in Nagpur as ‘Jai’ and ‘Veeru’ said one person, referring to the screen names of the lead characters in iconic Bollywood film Sholay. Darda strongly denied he had anything to do with Jayaswal’s rise. “Manoj is a self-made man and whatever he has achieved is on his own guts and business acumen. I have friendship with many business tycoons and politicians. Does that mean they have become great just because they are friends with me?” he said.

An associate of Basant Lall, returning calls seeking comment, said the patriarch couldn’t speak because he is unwell.

Either way, relations between the two branches of the family remain strained. Basant Lall did not attend the weddings of any of Jayaswal’s children—Abhishek, Abhijeet or Swatee.

Meanwhile, Jayaswal’s empire continued to grow.

The Abhijeet Group was a dasher even in the get-rich-quick business of mining. In August, the group raised eyebrows when it announced a $7 billion (Rs.38,850 crore today) coal sale and purchase deal with US-based company FJS Energy Llc giving it access to 9 million tonnes (mt) of coal annually from the US for 25 years. The group’s website is an exercise in hyperbole, speaking about nation building and 12% gross domestic product growth targets. It describes its chairman as “a true entrepreneur, a veteran leader and a visionary”, differentiating him from his son Abhishek, a director at both JLD Yavatmal Energy and JAS Infrastructure Capital, whom it describes as “a diehard entrepreneur, involved in managing the day to day operations of the entire group”. Abhishek is named in CBI’s complaint.

Jayaswal and his wife Manisha currently occupy a penthouse in JP Heights, a building in Behramji Town, a tony neighbourhood in Nagpur. Although he has largely managed to stay out of the media eye in the past 10 years, Jayaswal displays all the signs of a man who has made a lot of money very fast, according to the first associate. He owns at least one private jet, is a regular at high-society parties, and has held plenty of his own. When his daughter Swatee got married in Thailand in 2009, Indian wedding blogs gushed that the event was the most expensive ever to have been held in Phuket.

From the many photographs of Jayaswal that crop up in society pages, his sartorial choices seem to lean towards loud shirts, velvet jackets, glitter and applique jeans. In most of these images, he sports a thin moustache, and a very wide, very white smile. In March last year, Jayaswal hired the Indian rapper and hip-hop singer Hard Kaur to perform at his birthday party in Nagpur. Kaur was photographed dancing with Darda on stage. This year, in Nagpur, according to guests who attended his birthday celebrations, he upped the ante. The crowd of guests were taken aback when Jayaswal arrived on the stage, wearing a jacket studded with disco lights and holding a guitar in the manner of Amitabh Bachchan in the film Yaarana. Six skimpily clad European dancers posed around him, according to a business associate of Jayaswal’s.

The details of where Jayaswal’s wealth really comes from are hazy. “Apart from the Abhijeet Group’s two road projects, there is no other project which is up and bringing steady revenue to the group,” said a senior business journalist from Nagpur, who did not want to be identified. “But despite this, we wonder from where he gets hundreds of crores to acquire a top-line private jet.”

The BJP MLA proffered the Darda angle. “Apart from his close proximity to Lokmat Group of newspapers chairman Vijay Darda, which opened all the doors to him right from president of India to president of Congress and BJP (and), more importantly, that of the financial institutions, that loaned thousands of crores to Abhijeet Group, there seems to be no reason behind his meteoric rise,” added this person, who did not want to be identified.

Still, it isn’t difficult to join the dots. Many small-time entrepreneurs in India have made it big by focusing on businesses that involve some natural resources, the allotment of which is controlled by the government. All it takes is ambition and access to the right people.

That is what Jayaswal seems to have done.

Though Jayaswal lives in Nagpur, he graduated from the University of Calcutta. He has relatives (Santosh Jain, to whose daughter one of his sons is married) and close business associates in Kolkata. And he always had his eye on the main chance, said the first associate.

He was among the first to realize the importance of coal blocks early and stepped up his efforts to befriend “key politicians cutting across party lines”, this person added. With time, he even became a lobbyist for other companies seeking coal blocks, the associate said. Mint couldn’t confirm or authenticate any of the associate’s claims.

The associate and a former executive at a state-owned energy company also claim that Jayaswal held “community” meetings in several cities to felicitate coal minister Sriprakash Jaiswal. The executive said he attended some of these. “No, never,” said the private secretary to coal minister Jaiswal in a phone message when asked if Manoj Jayaswal had held felicitation functions for the minister. Jaiswal himself didn’t respond to an email.

Jayaswal and his estranged family hold at least 10 coal blocks among them, counting those owned by Jayaswal Neco companies and Abhijeet Group subsidiaries since 1999. The CBI-named blocks are in Mahuagarhi, Jharkhand (allotted in 2008 and shared with Cesc Ltd), Fatehpur East, Chhattisgarh, and Bander, Maharashtra.

A senior official in the Chhattisgarh government, who spoke on condition of anonymity, said, “It is quite clear that there are too many properties that have been given to this family, rightfully or wrongfully. For one business family to own so many blocks when their operations are not so big, it is questionable. Is it an equitable distribution of mineral resource that is scarce?”

Jayaswal’s efforts really started paying off in 2005. Initially, he received the coal blocks along with Jayaswal Neco. He made sure the blocks were allotted to Abhijeet Infrastructure Capital (which was renamed Abhijeet Power Ltd in November 2010, and is now his empire’s flagship). During the split with his family, he ensured that Abhijeet Infrastructure remained under his control.

His modus operandi was simple: showing coal blocks and power purchase agreements with distribution companies, he managed to get loans out of banks.

He followed up the coal block allotments with agreements with states such as Jharkhand to build power plants. Financial closure followed.

Abhijeet Power invested more than Rs.3,000 crore of borrowed money in two proposed power projects even before the company concluded acquiring land for them, according to the company’s draft red herring prospectus (DRHP) filed in June 2011 ahead of an aborted share sale, and reviewed by Mint. According to this filing, the company spent around Rs.232 crore on land and site development, and expected to instal equipment only in September-October 2012, so the details of where it invested the reminder of the Rs.3,000 crore isn’t clear.

The company tried to raise Rs.1,375 crore by selling shares through an initial public offering (IPO) last year to fund the Jharkhand and Bihar projects. The IPO was eventually aborted.

Abhijeet Power is currently developing three coal-fired power plants—one each in Maharashtra, Bihar and Jharkhand—with a combined installed capacity of 2,671.6 megawatts (MW). The projected cost of the two bigger plants—Chandwa (1,080MW) in Latehar, Jharkhand, and Banka (1,320MW) in Bihar—is Rs.13,482 crore.

The group claims to have invested Rs.3,164 crore in these two projects as of 30 April 2011, according to the prospectus, which also indicates plans to invest an additional Rs.3,100 crore by 31 March 2012.

However, it hadn’t at the time of filing its DRHP in June last year concluded land acquisition. Of the 768 acres it needed for the Chandwa project, it had only acquired 460 acres till then. For the Banka project, too, it had acquired 460 acres, whereas the total need was 785.5 acres.

Further, Abhijeet Power gave the contract to implement the two proposed power plants, including construction and procurement of equipment, to a group company Abhijeet Projects Ltd. The conventional practice is to give out such contracts to large construction and engineering firms with an established track record of executing them. The Abhijeet Group has, till now, built only a small captive power plant of 25MW in West Bengal, according to its prospectus.

Still, it is clear that banks were happy to lend money to Jayaswal’s companies. For instance, two Axis Bank Ltd-led consortiums had sanctioned loans of Rs.5,280.4 crore and Rs.4,104.6 crore to a subsidiary of Abhijeet Power.

Another group company received a funding commitment of Rs.2,030 crore from a consortium of banks led by Allahabad Bank, and an assurance of Rs.1,450 crore more from Rural Electrification Corp. Ltd and State Bank of India (SBI).

Yet another group company received a sanctioned credit line of Rs.1,375 crore from various institutions, including India Infrastructure Finance Co. Ltd and Housing and Urban Development Corp. Ltd.

The prospectus states that Axis Bank, Punjab National Bank and UCO Bank had agreed to finance the company’s Banka project to the tune of Rs.7,400 crore. An Axis Bank spokesperson told Mint on Thursday that the bank was a “part of three banks that sanctioned the loan” and that “since then, the loan has been syndicated to a 11-member consortium of which Axis is a part”. The spokesperson added that the bank had “no exposure to the company’s coal blocks under question”.

Mint also reported on 6 September, citing an unidentified banker, that SBI had an exposure of Rs.2,200 crore to the Abhijeet Group, but has Rs.3,300 crore as collateral.

According to the prospectus for Abhijeet Power, the group’s consolidated debt (only principal) was at Rs.3,335.66 crore on 30 April 2011. It also had a foreign currency loan of $19.69 million.

To improve its debt-equity ratio ahead of the now aborted IPO, Abhijeet Power merged with itself a group company. Under a Calcutta high court approved scheme, Abhijeet Power allotted to group chairman Manoj Jayaswal and his family—the shareholders of the merged company—shares worth Rs.1,008.66 crore for free. This resulted in Abhijeet Power’s paid-up equity jumping to Rs.1,462.78 crore.

The prospectus discloses a rash of offences committed by various Abhijeet Group companies, but the nature of such filings requires companies to come clean on all such incidents, major and minor.

The prospectus also emphasized the company’s strength: access to coal. “One of the key factors for the success of any power project is the availability of cost-effective fuel sources throughout the lifetime of the power project.”

That’s the strength that’s come back to haunt Jayaswal, although the first associate insists things aren’t what they appear to be.

“Manoj is a fall guy of this scam—he fits the bill because of his lifestyle. The whistleblowers were essentially other companies that received blocks, but not as many (as him),” he said.

Still, most of Jayaswal’s close associates and chance acquaintances have been quick to distance themselves from him. Darda did so in an interview on television channel Times Now. Law minister Salman Khurshid, photographed at a Jayaswal family function, spoke on the same programme. “The fact that you are at a wedding and that you socialize with them doesn’t mean that you are part and parcel of any decision they take,” he said, “particularly of an economic or business nature...and particularly if that decision is of a questionable nature.”

makarand.g@livemint.com