Take a look at some of the macro mess-ups that drove companies to bankruptcy

 The Economic Times, DEC 11, 2017

It's commonplace to blame the promoters of bankrupt companies of gaming the system for years by diverting funds, wilful defaults, perpetrating fraud and indulging in malfeasance. But the corporates argue they are not unmitigated villains. In many cases, their businesses caved in due to lax government response, policy perversions, harsh judicial interventions or even wrong incentives. For some they were fatal, for others severe bodyblows. Rakhi Mazumdar & Rachita Prasad get behind those macro mess-ups. 


Essar 

Steel Raw material disruptions 
1. De-allocation of Reliance KGD6 gas in mid-2011 for domestic steel sector robbed the main fuel linkage (68% of Hazira plant dependent on natural gas) & hit capacity ramp up, capacity utilisation came down to 35% Revenue loss on account of non-availability of gas was estimated at over Rs 26,000 crore by company. 
2. Essar Steel built a 267-km pipeline in 2005 to carry iron ore in slurry form from mines in Kirandul, Chhattisgarh, to pellet plant at Visakhapatnam. Between 2005-10, pipeline was damaged over 20 times by Naxalites, thereby chocking feedstock to the furnace. 

External factors 
1. Falling steel prices and the deluge of cheap Chinese imports since 2012. 
2. Debt of a 10 mt steel plant had to be serviced with a production of 3.5 mt.  

Bhushan Steel 
Raw material disruptions 
1. SC ban on mining in Karnataka in 2011 made iron ore sourcing and purchase more diffi cult & expensive. 
2. De-allocation of New Patrapara coal block in September 2012 led to closure of the 1.8 million tonne DRI based sponge iron unit.  

External factors 
Falling steel prices and the deluge of cheap Chinese, Korean, Japanese imports since 2012.  

Electrosteel 
Raw material disruptions 
De-allocation of Electrosteel Castings' North Dhadu coal block in Jharkhand hurt three 60MW power plants & a sponge iron unit. Co was forced to rely on blast furnace route for iron making.  

People issues 
Siyaljhori plant in Bokaro, Jharkhand was being built using Chinese equipment and had a number of Chinese workers during construction who got affected due to change in visa policy.  

Jaypee Infratech 
1. National Green Tribunal's 2013 ruling stayed construction within 10 km of the Okhla Bird Sanctuary, halted construction of apartments along the Noida-Greater Noida Expressway, resulting in a 60 per cent drop in the company's revenues in 2016/17. 
2. Change in state govt in UP made clearnances for real estate and commercial projects around Yamuna Expressway diffi cult; revenue fell way short of original estimates.  

Lanco Infratech Raw material disruptions 
1. KG Gas unavailability impacted output from Kondapalli Phase-I - 368 MW, Kondapalli Phase-II & III - 1108 MW, Tanjore- 120 MW. It also impacted ongoing projects like Amarkantak III & IV (1320 MW).  
2. Cancellation of Gare pelma II coal mining block in Chhattisgarh.

Policy Paralysis 
Faced cash flow issues due to huge outstanding dues with state owned discoms Company set up huge merchant power capacity which was later discouraged by government.   

Monnet Ispat 
Raw material disruptions 
Five coal mines - including Gare Palma IV/5, Urtan North (jointly with JSPL) Rajagamar Dipside (jointly with Topworth Steel) — got deallocated by SC in 2014.  

Smaller companies 
Jyoti Structures 
As a power transmission player, got caught up in overall sector degrowth. Issues relating to right-of-way and other clearances delayed projects. 
Could not start work on projects after gaining approvals in some projects due to crash crunch Delay in payments from customers. 

Era Infrastructure 
Projects delayed due to unavailability of land and environment clearances. Dues under litigation. Cost escalation on project & delay in payments from customers hurt cash flow.  


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