Empire Burlesque
The statement succinctly sums up the frustrating dilemma faced by the Pure Drinks group. In spite of having real estate worth Rs 1200 crore, the group is virtually choked for cash, and is unable to meet even its working capital requirements or service its ever-mounting debts.
The situation facing the group is very queer indeed. Even though the group owns prime real estate properties running into several crores, the renting or leasing out which could generate enough funds to take care of its working capital requirements several time over, its hands are tied behind its back.
Caught up in a swirl of legal controversies and a maze of complicated cross-shareholdings, made worse by the bitter feud between partners, the group finds itself unable to sell, or even leverage, its huge real estate portfolio. This, even as it unsuccessfully scrounges around for the elusive working capital and stares at the mounting labour payments and interest dues.
Moreover, the various lawsuits confronting the group have cast serious doubts over its credit-worthiness. No wonder the commercial banks and financial institutions have yanked off the cash-line to the group. As a result, most of the groups activities have come to a grinding halt.
How has late Charanjit Singhs mega-Campa Cola-empire come to this pass? The reasons leading to the present meltdown are far too many to recount. In fact, one is quite prone to get lost in the sheer maze of legalities and allegations that surround the group.
But at the end of the day, it is yet again a sibling slugfest which is at the bottom of the groups great fall the unending rivalry between Satwant Singh and his brother Ajit Singh, who allegedly enjoys the support of their aunt Harjit Kaur, the widow of late Charanjit Singh.
The corporate empire is crumbling, as a result. According to Ajit Singh, the group as a whole has run up an accumulated debt of over Rs 100 crore. The company has incurred heavy debt liabilities to various financial institutions. And overdues in labour payment are a major chunk of the total outstand- ing amount.
Faced with several legal suits, Pure Drinks has virtually shut down most of its factories in Chennai, Calcutta and Mumbai which employed over 700-800 workers. However, these employee-contracts have not been terminated since the factories have not been officially winded up. The end result being that these dead-weight labour bills are mounting every day. With five out of the nine bottling plants owned by Pure Drinks having remained shut for the past 3-4 years, the labour wage bills have been piling up as there has been no retrenchment, emphasises Ajit Singh.
To counter the situation, Singh and his allies have formed a revival plan which hinges crucially on the sale of group properties. Since we have over Rs 1200 crore of real estate, the rehabilitation plan for the group depends solely on the sale of any of these properties, says he.
The chairman, thus, has made his position clear. I am willing to sell any of the properties, except my house, if there is any buyer, he remarks. Of course, any decision to sell the properties will have to be agreed upon by Satwant Singh and Harjit Kaur. But they should realise that we need money to pay our creditors. And we need a healthy balance sheet to encourage banks to extend loans to us so that we can start our bottling operations again, he points out.
As part of the rehabilitation strategy, the group has employed Richard Ellis, the real estate consultants, to arrange for either leasing or renting out of its commercial properties, or to find a potential buyer for any of the properties in Calcutta, New Delhi, Chennai, Mumbai or Chandigarh.
However, industry watchers are not too enthused by the grand sell-off plan and see too many hitches. For one, the properties owned by the group are controlled by various group companies with a complicated pattern of cross shareholdings and management rights. This makes the sale procedure extremely arduous, reveal industry sources. For example, the prime property at Chennai, valued at Rs 300 crore, is owned by Pure Drinks (Calcutta), but its development rights are vested with Pure Drinks (Delhi).
However, this is just one small crimp in the rehabilitation plan. The main obstacle remains the bitter rivalry between the two brothers, Ajit Singh and Satwant Singh. So much so that Satwant Singh, who is also on the board of directors, outrightly denied that there was any such plan on the anvil.
It is clear that Satwant Singh is dead against the sell-off idea, or at least till it remains within the realm of the Ajit Singh-Harjit Kaur combine. Earlier, he had even approached the Jullundher district court, alleging that Ajit Singh and Harjit Kaur were attempting to dispose off the assets belonging to the company which would cause irreparable loss to it.
However, while speaking to Business Standard, he maintained that the rehabilitation plan as proposed by his brother was not viable since the structure of the company and the pattern of shareholding within the various companies would nullify such a move.
The picture given to Business Standard is incorrect. Each company within the Pure Drinks group is a separate legal entity and has to be looked at separately before any decision is taken. There are several companies within the Pure Drinks fold, namely Pure Drinks (Calcutta), Pure Drinks (New Delhi), Southern Bottlers (Chennai), Pure Drinks (Mumbai) and Punjab Beverages among others. Each have their own liabilities which should be looked at separately, pointed out Satwant Singh.
The open feud between the brothers, coupled with the confusion over the legal status of the groups real estate, has resulted in customers shying away from buying or renting any of its commercial property.
There have been decisions in the past by the Pure Drinks board to raise money through various routes. On each occasion, Harjit Kaur and Ajit Singh obtained a stay and sabotaged attempts by the companies to meet their obligations. With every deal, they want commissions and kickbacks, and hence, the deals have fallen through, alleges Satwant Singh.
For instance, the group had been earlier approached by Amway, the US-based direct selling company, for purposes of renting space in Sardar Mohan Singh Place building located in the commercial district of Connaught Place in New Delhi. The deal, which was brokered by Richard Ellis, has fallen through since the two brothers not only did not see eye-to-eye on the terms of the contract but also suspected each other of payoffs.
In fact, Satwant Singh has alleged that Ajit Singh and Harjit Kaur are clandestinely colluding to sell the properties belonging to the group through Richard Ellis. He has also alleged that the other directors, (indicating Ajit Singh and Harjit Kaur) had illegally called a meeting of the board of directors on December 29, 1997, whose agenda included an item to dispose off the companies properties.
Thus, allegations and counter-allegations are flying thick and fast. And each concerned partner is ensuring that the others do not get to bite the apple. For now, in the true traditions of feuding business families, they are all content to starve it out.