How banks helped Modi's new minister get rich while shareholders got poor

While YS Chowdary is extremely wealthy, the shares prices of his three listed Sujana companies are down by 93-97% while being bailed out by banks

Prime Minister Narendra Modi on Sunday inducted 21 ministers in his cabinet. This includes Telugu Desam Party (TDP)'s YS Chowdary, popularly known as Sujana Chowdary. He is an industrialist and one of the richest members of Parliament (MPs) in Rajya Sabha with assets of about Rs190 crore. However, the Sujana group headed by Chowdary is also one of the biggest bank defaulters. Should not PM Modi, who talks about 'cleanliness' in public life all the time, ask his minister to clean his slate before serving in the government?



Citing a release issued by Central Bank Employees Union last week, Congress general secretary Ajay Maken alleged that Chowdary had defaulted on repayment of Rs316 crore taken from Central Bank of India.



Finance minister Arun Jaitley defended inclusion of Chowdary in the Modi cabinet. "They said TDP representative Chowdary has non-performing assets of his company. One of his many companies -- he is a well-known industrialist -- was making losses. One account was in difficulty. The bank restructured it; he is paying back all the instalments (and) has a regular account today," Jaitley told the Times of India.



The All India Bank Employees' Association (AIBEA), which released a list of top 50 defaulters in the country, had identified one of Chowdary's companies. The list released in December 2013, shows that Sujana Universal Industries Ltd (erstwhile Sujana Industries) with dues of Rs330 crore was one of the biggest defaulters. Of this, Rs203 crore pertained to a loan taken from Bank of India and Rs127.42 was taken from Central Bank of India.



Earlier in July 2014, while releasing list of 1,129 'wilful' bank defaulters whose loan dues were about Rs54,000 crore in Andhra Pradesh alone, P Venkataramaiah, general secretary of Bank Employees Federation of India (BEFI), has said, "Most of the companies mentioned in the list are still being run by politicians, bureaucrats and other influential persons who are blocking the recovery."



As of March 2014, Sujana Universal had long-term borrowings of Rs176.62 crore, down 7.63% from Rs191.11 crore in FY2013. However, its short-term borrowing increased by Rs23.14 crore to Rs380.01 crore from Rs356.86 crore during the same period.



Sujana Metal Products Ltd has a long term borrowing of Rs940.1 crore as of March 2014, up by Rs135 crore from Rs805.9 crore as on March 2013. Its short-term borrowing also increased to Rs687.36 crore from Rs536.53 crore, same period a year ago.



According to Sujana Towers Ltd’s annual report for FY2014, this unit was on a borrowing spree. Its long term borrowing has increased by Rs595.04 crore to Rs1,038.64 crore as on March 2014. The company attributed the huge increase in borrowing to working capital term loan (WCTL) and interest on WCTL converted as funded interest term loan (FITL) taken from banks and increase in promoter's contribution as per corporate debt-restructuring (CDR) package it obtained. Its short-term borrowing decreased 6.8% in March 2014 to Rs648.52 crore due to decrease in working capital loans following conversion to WCTL as per the CDR package.



Chowdary's Sujana group’s three companies, Sujana Universal, Sujana Metal and Sujana Towers listed on the stock exchanges. Their stock prices tell us the story of these three companies. All three have reported losses during FY2014.



For the year to end-March, Sujana Metal reported a net loss of Rs20.57 crore from a net profit of Rs41.62 crore while its total revenues fell to Rs3,394.9 crore from Rs4,247.1 crore, same period a year ago. Same is the story of the company's share price. From a high of Rs149.2 in May 2007, Sujana Metal is currently trading at just Rs3.78 on the BSE – a fall of 97%.





These companies have been trouble for decades and have been merrily taking advantage of government ownership of banks and complete lack of accountability. In 2003, Sujana Metal, the then Rs412 crore loss making steel re-rolling and casting company, obtained a corporate debt-restructuring (CDR) from its lenders. Lenders led by Industrial Development Bank of India (IDBI), sanctioned an ad hoc debt restructuring facility as well as deferred repayment of principle and interest up to March 2005 for Sujana Metal.

Industrial Finance Corporation of India (IFCI), Bank of Baroda, Bank of Rajasthan, IndusInd Bank and the South Indian Bank were part of the lenders who permitted the CDR package to Chowdary's group company.



Sujana Universal said its net loss widened to Rs6.30 crore from a profit of Rs3.4 crore during FY2014. During 2013-14, the company's total revenues increased marginally to Rs3,465.75 crore from Rs3,367.66 crore a year ago period.



Sujana Universal traded at Rs42.7 in August 2005, its highest over the past nine years. Currently, it is trading at about Rs2.55 on the BSE a fall of 93% over nine years.





During the year ending March 2014, Sujana Towers' net profit tumbled to Rs2.66 crore from Rs6.56 crore, while its total revenues declined to Rs1,823.5 crore compared with Rs1,827.1 crore in the 12-months to end-March 2013.



Sujana Towers' share price movement is also not different from its two group companies.

On January 2008, Sujana Towers traded at Rs354.3 and tumbled to a low of Rs19.4 in February 2009. In April 2014, Sujana Tower touched its lowest level of Rs7.46 over the six years. At present, the scrip is trading at around Rs16.5 level, a fall of 95% from the peak.