Once a $4-bn conglomerate, the Avantha Group is under financial stress

In the days after Partition, when Kolkata (then Calcutta) witnessed bloody riots, Karam Chand Thapar’s daughter flew in from the US and landed at the Dum Dum airport. The story goes that the chairman of the Thapar Group had warned his daughter not to step out of the airport till he came to fetch her. A few hours later, he came to pick her up in a bus, along with a group of men armed with swords. Before leaving the airport, he is said to have told his daughter: “If anything happens, I will shoot you. Are you prepared for it?”

It was perhaps this indomitable spirit, this readiness to face any eventuality, no matter what the cost, that helped Thapar, who hailed from Ludhiana, to single-handedly build up the Thapar Group. Set up in 1919, by the 1960s, the group had become a business conglomerate with interests in coal, sugar, textiles, paper, insurance, and banking, among others.

Decades later, in an interview published in IndiaKnowledge@Wharton, Karam Chand Thapar's grandson, Gautam Thapar, echoed sentiments that the family patriarch may have had: “I see myself as an entrepreneur. I believe I have the vision to spot opportunities to create value and wealth, the risk-taking ability to commit to the opportunity, and the ability to put together a management team to execute.”

That interview was published in 2009, when the Avantha Group, the Thapar family conglomerate’s flagship, was at its pinnacle. Gautam Thapar was at the helm of a $4 billion empire, built through years of organic growth and a series of ambitious international acquisitions. At the time, the group had exposure to businesses as varied as consumer electrical, industrial machinery, paper, pulp, power, food processing, IT- enabled services, and had its footprint in several countries.

Between 2005 and 2012, the group’s two flagship companies — Crompton Greaves, the industrial manufacturing and consumer electrical business, and Ballarpur Industries (BILT), its paper manufacturing business —  made nearly a dozen overseas acquisitions. The internal target was to clock $10 billion in group revenues by 2013. Some insiders said at the time that Gautam Thapar would have made his grandfather proud.

Till the 1990s, the Thapars, who had settled in Delhi, featured among the Top 10 business groups in the country. However, post liberalisation, the group started to lose heft in the face of growing competition from new domestic and foreign players. Subsequently, its businesses were split among family members. Gautam Thapar, cornered the biggest chunk, with both Crompton Greaves and BILT, among others, in his kitty. Growing at a scorching pace, the group under Gautam Thapar, which generated revenues worth $1 billion in 2003, touched the $4 billion mark by 2009. 

However a decade later, in 2019, the growth script seems to have gone awry. The two flagship businesses of the Avantha Group — Gautam Thapar re-christened the group in 2008 to downplay the family legacy — are under financial stress. Thapar, along with some senior executives, are fighting allegations of fund-siphoning by the promoter group in CG Power that houses the power and industrial solutions business. In August this year, Thapar was forced to resign as chairman of the board of CG Power. He now owns a minuscule stake in the company, as against 40 per cent in March 2014.
 

BILT, the group’s oldest business, has run into losses and is going through a debt restructuring exercise, with lenders having taken control of the company in 2017. Thapar has around 25 per cent stake in the company, but has pledged most of his shares.

The power generation business that Thapar entered in 2008 has also come a cropper and  added to his debt burden. Faced with financial stress, Thapar de-merged the consumer electrical business from Crompton Greaves and, subsequently, sold off his stake in that business for about ~2,000 crore.

Industry players, analysts and ex-employees feel that the group could not recover from the rapid expansion and acquisition spree that Thapar had embarked on, which stretched management bandwidth and financial resources. The debt-funded expansion caused financial stress across group companies when the time came to repay the loans. The thermal power business also took a beating when the Supreme Court scrapped the licences of coal mines.

“Thapar became a poster boy for how a family business could become a global conglomerate in a short time span,” notes an ex-director who worked in the group for several years. “Some of the international acquisitions did not play out as expected due to internal reasons and certain adverse global market conditions,” adds a former senior executive. 

Gautam Thapar once described his grandfather as an entrepreneur and builder, and one who loved to take risks. Clearly, he now needs to invoke his grandfather’s fighting spirit to check the slide in the family fortunes and steer his businesses back to safety.