Piyush Goyal Was at the Helm of a Firm with Poor Financial Record

Piyush Goyal is in the eye of a storm as a news report claimed that the company led by him defaulted on loans.

5 min read
Piyush Goyal has been caught in the eye of a storm as a news report claimed that the company led by the Union minister defaulted on loans.

A story published by The Wire claims that a company with Union Minister Piyush Goyal as its chairman was unable to repay loans worth Rs 650 crore. Mumbai-based Shirdi Industries owes Rs 650 crore to eight public sector banks. The firm had borrowed money for its expansion in 2010 and was declared a sick company in 2015 after defaulting on loans. Despite its unimpressive financial credentials, Shirdi Industries gave a loan to a firm owned by Goyal’s wife, Seema and son, Dhruv Goyal.

With the cabinet minister caught in the eye of a storm, here are the key takeaways from the controversy that could embarrass the NDA government:


1) Piyush Goyal Led the Firm that Defaulted on Loans

Till July 2010, Union Minister of Railways Piyush Goyal served as the chairman of Mumbai-based Shirdi Industries according to the report published by The Wire.

In another report by the Hindu Business Line, Shirdi Industries, a Mumbai-based firm that specialises in manufacturing laminates is said to have been ‘doing well till 2010 and had filed for IPO (Initial Public Offering) to raise Rs 120 crore for expansion.’ Since the clearance for the IPO got delayed by over 27 months, Shirdi Industries ‘borrowed from a consortium of eight banks’ that turned into an accumulated debt of Rs 650 crore.

The trend of defaulting on loans began while Piyush Goyal was still on board as the chairman of the company:

Shirdi had started delaying various payments when they fell due even during the time Piyush Goyal was chairman between 2008 and 2010, and formally started to default on loan payments from 2014 onwards.

2) Loan Given to a Firm Owned by Goyal’s Wife

Defaulting on loans secured by banks is just one part of the problem, questions are being raised on Shirdi Industries offering an unsecured loan to Asis Industries, which in turn passed it on to Intercon Advisors Private Limited. The Wire claims, ‘the last statutory filing done by Intercon for FY 2016 shows an outstanding amount of Rs 1.59 crore to Asis Industries, a company owned by Shirdi promoters.’

According to the data research portal Tofler, Intercon Advisors Private Limited is a Mumbai-based unlisted private company that came into existence on 15 September 2005. The company’s profile on Tofler mentions Seema Piyush Goyal as one of the two directors.

The loan given to Intercon Advisors Private Limited was an ‘inter corporate deposit repayable on demand’ according to the story published by The Wire. It means that the loan amount didn’t have a maturity date and could be paid back as and when asked to do so by the lender within a stipulated period of time.

Rakesh Agarwal, the promoter of Shirdi Industries has denied any wrongdoing and has, in fact, justified the unsecured loan in his response:

This amount (unsecured loan) was given a few years ago. At that time we had money and I was requested if I can spare money and given our friendship I did. But this loan was given from Asis Industries, which is the holding company of Shirdi. Asis, therefore, is not the defaulter company.
Rakesh Agarwal, Promoter, Shirdi Industries (as told to The Wire)

Not just Goyal’s wife, filings on part of the Intercon Advisors Private Limited suggest that Dhruv Goyal, son of Union Minister Piyush Goyal is also among one of the partners of the firm.

In an affidavit dated May 2016 filed before the Rajya Sabha elections that includes declaration of income and assets by Piyush Goyal and his family members, Dhruv Goyal has been shown as holding unquoted securities of Intercon Advisors Private Limited that amount to 31,649.


3) Banks Which have Suffered

The consortium of banks that had lent money to Shirdi Industries Pvt Ltd included:

  1. Union Bank
  2. State Bank of India
  3. UCO Bank
  4. Bank of India
  5. Indian Bank
  6. Standard Chartered Bank

The Wire has also named those public sector banks whose loans haven’t been repaid by certain companies belonging to the Asis group such as the Dena Bank, State Bank of India and J&K Bank.

4) NCLT Order Gives Respite to Shirdi Promoters

In December last year, an order by the NCLT (National Company Law Tribunal) allowed the promoters of Shirdi Industries to bid for the non-performing assets of their company, which ‘was in contravention of the Modi government’s 2017 ordinance’.

On 4 November 2017, President Ram Nath Kovind had cleared the Insolvency and Bankruptcy Code (IBC) Ordinance, thus, making it ‘difficult for the promoters of defaulting companies from regaining control of their assets being sold under the bankruptcy process.’

Yet an exception was made for Shirdi Industries as lenders ‘reposed their faith’ in the company.


5) ‘Piyush is a Close Friend’

Rakesh Agarwal, one of the promoters of Shirdi Industries has denied allegations of drawing benefits owing to his company’s links with Union Minister Piyush Goyal:

Piyush is a very close friend of mine since 1994. My relationship with Piyush is of a very loving nature and a very respectful nature but I have never used that relationship or taken benefits from it.
Rakesh Agarwal, Promoter, Shirdi Industries (as told to The Wire)

While the Congress President Rahul Gandhi took to Twitter as he took a dig at Goyal for this 'Shirdi ka chamatkar', there hasn't been an official response from the concerned minister or BJP so far.

6) CRISIL had Criticised Shirdi Industries in 2010

A scathing report by the market ratings agency CRISIL, dated 26 November 2010 was of the view:

CRISIL has assigned a CRISIL IPO grade of ‘2/5’ (two on five) to the proposed IPO of Shirdi Industries Ltd. This grade indicates that the fundamentals of the IPO are below average relative to the other listed equity securities in India.
CRISIL Report (November 2010)

Annexure 2 in the CRISIL report that mentions the profile of directors who own the Shirdi Industries mentions the name of Piyush Goyal as Chairman and Non Executive Director.

Union Minister and BJP leader Piyush Goyal continued as the chairman of Shirdi Industries till July 2010 according to The Wire, which was also ‘a period when loans were raised and delayed payments first red-flagged by CRISIL.’

CRISIL had further noted in 2010 how the organisation was marred by poor governance:

The grade is constrained by poor corporate governance practices and weak second line of management, which is inadequately informed about the key aspects of business operations.
CRISIL Report (November 2010)

It seems that 2018 will be haunted by bad lending practices of the government-run banks as well as private banks in India. After the PNB (Punjab National) scam hit the headlines in January this year that revealed bad loans worth Rs 13,500 crore being granted to the jeweller duo of Nirav Modi and Mehul Choksi, news reports suggest a sweet deal that was allegedly offered by the Managing Director and CEO of ICICI Bank Chanda Kochhar to the promoter of the Videocon Group Venugopal Dhoot in 2008.

As the bad debt crisis continues to worsen with every passing day, The Wire story could spell fresh trouble for the BJP-led government at the Centre.

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