Tracking Gautam Thapar: Avantha Group poster boy's fall from grace

As Gautam Thapar, the 60-year-old promoter of Avantha Group, spends another night in the Enforcement Direct­orate’s custody, it is perhaps a coincidence that his brush with the law enforcement agencies, too, began in August two years back.

However, this storm has been brewing since August 2019, when he was removed as chairman of the board of directors of CG Power, an Avantha Group flagship, following allegations of ‘several irregular transactions’ in the company. He was subsequently removed from the board, and the capital markets regulator, too, stepped in, barring him, and some other executives, from accessing the securities market. However, it was his association and financial dealings with YES Bank and its high-profile founder Rana Kapoor that precipitated intense scrutiny of his business transactions, amid allegations of financial fraud and money laundering.

This is a far cry from the poster boy image that Thapar enjoyed till around 2010. An ex-director of Avantha Group, who has worked with Gautam Thapar very closely for several years, once told Business Stan­dard: “Thapar became a poster boy of how a family business could become a global conglo­merate in a short time span”.

Between 2004 and 2010, Thapar went on a rapid expansion drive. This was largely driven through a series of debt-driven overseas acquisitions and diversifying into new business opportunities.

The conglomerate — whi­ch Thapar rechristened Avan­tha Group to create a distinct identity from the family businesses — was once valued at close to $4 billion by 2009, with business interests in 10 countries.

Thapar modelled himself on his grandfather Karam Chand Thapar, who founded the group in 1919. He reached the helm of affairs in the family business with a reputation of being a corporate turnaround specialist, after reviving several of the group's loss-making companies. His uncle, Lalit Mohan Thapar, groomed the young US-returned chemical engineer in the mid 1990s, and eventually handed over the reins of the family business to Thapar.

Group insiders and analysts say that the group could never recover from the rapid expansion drive, along with some failed foreign buyouts. By 2015, the group’s debt piled up, going beyond Rs 6,500 crore. Thapar then pressed the reset button. There followed a series of sell-offs, including several power projects, pulp units, consumer durables business, land assets, among others. But it was not enough to deleverage the group companies.

What followed was a gradual decline in corporate governance standards in several group companies, with internal controls going for a toss. The desperation to deleverage debt and the pressure to buy back pledged shares did Thapar in, feel many analysts.