IIPM : WHAT GOES AROUND, GOES AWAY

IIPM BUSINESS AND ECONOMY
The Essar story could well have ended as one of another traditional Indian family business going down the drain, crippled by market forces. The difference is that Essar bounced back after undergoing a painful Corporate Debt Restructuring (CDR) programme. Things are beginning to look up for the Ruias-run group, which was grappling with problems surrounding their flagship Essar Steel, which was caught off -guard due to the slowdown in the economy. As a result Essar found itself in deep financial crisis. After coming out of the CDR cell, Essar is aggressively investing in capital intensive sectors like telecom, steel, petroleum, power, and shipping. In all these sectors it has to contend with heavyweight rivals. In petroleum, Essar is clearly dwarfed by Reliance. Again in the steel industry, global giants like Mittal Steel and Posco ace over Essar. Isn’t it risky for the company to invest so heavily at this stage? According to the Essar spokesperson; “Each project... is independently financed based on its merits. Hence, there is no question of divesting businesses to fund these projects”. So far the mantra of investing in capital intensive areas has been good for the Group, but it should focus more on a few specific sectors by investing more capital. Surely, it would not want to go through CDR anymore…..

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Source :- IIPM Editorial, 2006

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