Debt-ridden Usha Martin's Rajeev Jhawar open to family settlement

Firm has been embroiled in a family war that broke out about a few of years ago, and peaked when Prashant Jhawar was removed as non-executive chairman

In the first signs of rapprochement amid a pitched battle for the control of Usha Martin, Rajeev Jhawar, one of the promoters, has said he is open to a settlement. 

The two promoter factions — Brij Jhawar and his son Rajeev Jhawar, currently the managing director, on the one side, and chairman emeritus Basant Kumar Jhawar and his son Prashant Jhawar on the other side — have an equal share of 25.5 per cent each in Usha Martin, the most prized entity in the group. A family settlement will, however, include other companies, too, like Usha Martin Education & Solutions, Usha Breco, UshaComm, and Prabhat Khabar.

Usha Martin, one of the largest wire rope manufacturers in the country, which has an annual turnover of about Rs 36 billion, has been at the receiving end of the family war that broke out a couple of years back. It peaked when Prashant Jhawar was removed as the non-executive chairman last April after the board passed a resolution to the effect. Subsequently, Prashant Jhawar filed a petition in the Calcutta High Court and also moved the National Company Law Tribunal (NCLT) against his ouster. 

On August 18, the NCLT issued an order directing the promoter and promoter entities to maintain the status quo on shareholding. A hearing in the NCLT is scheduled for Wednesday.

The lenders had an earlier agreement with the promoters to infuse an equity of Rs 900 million —  Rs 450 million by Rajeev Jhawar and Rs 450 million by Prashant Jhawar. But with the NCLT order in place, this was not possible. The infusion of equity has been a bone of contention between the lenders and Prashant Jhawar. The Prashant Jhawar faction claims that the commitment of bringing in equity was made by Rajeev Jhawar, and says it did not agree to bring in more equity as it was not sure whether the funds would be used to revive the company. 

Rajeev Jhawar, however, said, “I am always open for a settlement, but there would have to be willingness on the other side as well. If a settlement happens, it would include all the companies." In Usha Breco, Prashant Jhawar has a majority; in Prabhat Khabar, Rajeev Jhawar has a majority; and in Usha Martin, the two sides have equal stakes. He also said he would fight to get the NCLT order vacated.

In a communication dated December 15, 2017, to the Prime Minister's Office and the finance ministry, Basant Jhawar accused Rajeev Jhawar of fund diversion and having foreign bank accounts. The founder sought a detailed investigation against Rajeev Jhawar. The letter also alleged that the company's financial performance declined due to deliberate mismanagement and rampant diversion of funds and manipulation of its share price. 

Rajeev Jhawar countered the allegations, saying that Basant Jhawar was the chairman of Usha Martin till 2010 and Prashant Jhawar till April 2017. “Why are these issues being raised now? They were very much part of the board decisions,” he said. 

He also said his father was a non-resident Indian for the past 20 years and they were compliant with all regulations, especially on foreign accounts. 

Usha Martin is in the process of finding buyers for its wire ropes division. It has got offers from three international companies. But in the past few weeks, the sale process has gotten a little slow.

Family feud

Allegations by Basant Jhawar

• Usha Martin set up spurious companies in different countries for siphoning off funds
• Company’s performance declined due to deliberate mismanagement and rampant diversion of funds
• Projects at the cost of Rs 26 bn were commissioned in 2014 but the company showed no increase in output; gross Ebitda declined

Rajeev Jhawar’s response

• Compliant with all regulations
• Basant Jhawar was the chairman till 2010 and his son Prashant till April 2017, then why are they raising issues now
• They were party to all board decisions
• In a span of 11-12 years, firm’s topline grew from Rs 7-8 bn to Rs 36 bn; issues like coal block cancellation, downturn in steel market and expansion project going onstream responsible for performance