For a time this system worked beautifully for the Andhrapreneurs, underpinning years of breakneck expansion, the results of which are clear to see at almost every major Indian airport. As recently as 2008, Meghnad Desai, an economist at the London School of Economics, wrote: “When you go to China you see new airports and empty highways and the Shanghai maglev. In India, the airports are slums.”42 Yet later that same year GMR opened Hyderabad’s new terminal, delivered under a PPP contract, before unveiling an even grander international terminal in New Delhi in 2010. Equally shiny facilities followed for passengers in Bangalore and Mumbai, this time built by GVK. In a little under a decade, India went from having some of the world’s most embarrassing airports to some of its best. Over roughly the same period, Hyderabad’s infrastructure companies grew from little-known local builders to national champions.
Back in his sitting room in New Delhi, Lagadapati Rajagopal reflected on the vaulting ambitions he and his fellow tycoons showed during that period, and the hubris which ultimately undid them. “The problem was that India was growing at nine percent in those days, and everyone was expecting it to grow at double-digit rates, like China,” he told me. Lanco was especially ambitious: having done well early in the boom, the group took on ever more debt, on the assumption that the cycle of economic growth and infrastructure investment would keep going indefinitely. Rajagopal raced to build power stations, dig mines and lay highways. Many of his local rivals did the same, turning to state-backed banks to raise funds and plowing them back into even more ambitious projects. At the time, the theory was that India suffered an enduring structural gap between its rising demand and limited supply, and especially so in the infrastructure sector. Aiming to close that gap, the five largest Andhra Pradesh infrastructure companies built up a staggering $22 billion worth of debt. “All the major infrastructure players have two interesting things in common: they are either [run by] politicians or close relatives and most owe enormous sums to public sector banks,” as one study put it.43
But gradually at first and then all at once, things began to go wrong. Rajagopal rattled off the list: the global financial crisis in 2008; a subsequent slowdown in India’s growth; the “season of scams”; and finally the new “administrative paralysis” that took hold in New Delhi, as a wave of anti-corruption investigations shocked the political and business class. “A lot of economic activity came to a standstill,” he said. “The demand-supply gap vanished. All of us as entrepreneurs, we took pains to set up all of these projects, looking at this growth potential, which never happened.”
Suddenly, the same tycoons who for years seemed uniquely equipped to prosper within India’s complex business climate found that even they were undone by it. Problems affected industrialists all across India, although the once-mighty infrastructure giants of Andhra Pradesh were especially badly hit. And few represented their plight more clearly than Rajagopal himself, the man who won infamy with a can of pepper spray, as he spent his days trundling around New Delhi, trying to fix investment projects that had gone sour and figure out how to repay the giant sums that his struggling company now owed. “Naturally, if you can’t service the debt,” he said ruefully at one point, “the business goes down into the toilet.”
CHAPTER 8
HOUSE OF DEBT
The Big Bull
Five hours in, and I was beginning to understand the warnings: an evening out on the town with Rakesh Jhunjhunwala was not to be taken lightly. Beginning on the terrace of his Mumbai office with a $450 bottle of Johnnie Walker Blue, the night had wound on, first to a local watering hole, then a favored Chinese restaurant. I was much the worse for wear. My companion was just warming up.
A colorful financier with outspoken views and a taste for ribald jokes, the legend went that Jhunjhunwala began investing with just $100 in his pocket, turning it into $1.25 billion, according to Forbes in 2012, the year we met.1 He cut an outsize figure: a big man with a rotund face and a protruding stomach, which gave his white shirt a tent-like look. The waiters greeted him with familiar reverence and fussed as he wedged himself in at the table. “I only manage my own money, not for anyone else,” he told me at one point, once we’d been sitting for a while, a generous glass of whiskey clasped in one meaty hand. “I like my freedom, boss. I don’t want to be answerable to anyone. Fuck ’em. That is why I can say what I want.”
More even than his plain speaking, Jhunjhunwala was known for his relentlessly upbeat views. On India’s frenetic business news channels he was known as the “Big Bull,” a glancing reference to both his physique and the unswerving confidence of his investments. The first financier to join the country’s swelling band of billionaires, he had a special knack for spotting undervalued companies: Titan, for instance, a little-fancied watchmaker, whose stock went on a tear for much of the 2000s. He also held a messianic belief in India’s own prospects. “The factors that drive India’s growth are irreversible,” he told me. “The democracy. The demographics. The entrepreneurship. Much more is going to come.”
I came to meet Jhunjhunwala on a sweaty October evening in 2012, just after the end of the monsoon, and found him parked behind a desk watching data whiz by on no fewer than five terminals. He mumbled a greeting as an assistant ushered me in, but remained transfixed by the screens. I stood in one corner for a few minutes as he watched the numbers float down, like something out of the Matrix movies. Occasionally he grabbed the phone and barked “buy” or “sell” instructions down the line in Hindi, in amounts that appeared to involve trades in the millions of dollars. He was dressed plainly except for a huge diamond ring on one finger, which distracted the eye from the many cigarettes he smoked, leaving a deep, musty smell in the air. In one corner there was a garlanded shrine to Ganesha, the jovial Hindu elephant god, a deity thought to bring good fortune to commercial ventures, and whose generous potbelly somewhat resembled Jhunjhunwala’s own.
The day’s trading done, we moved to the outside terrace, which boasted a well-stocked bar on top of a fake grass lawn and fine views over the rickety skyscrapers of Nariman Point, southern Mumbai’s clapped-out financial district. From fifteen floors up, gazing between the buildings, I could see the distant outline of Malabar Hill, the fancy neighborhood across the bay where Jhunjhunwala lived, with his wife and three young children. The cantilevered silhouette of Antilia loomed off to the north, its lights glinting as dusk fell.
I asked Jhunjhunwala about his beginnings, which he said were modest. “The Ambanis and all these big industrial houses, they are empire builders. They have inherited legacies. I inherited no legacy,” he told me. His interest in stocks came from his father, a tax official, who talked about markets with friends over a drink. “I was a very, very curious child,” he said. These teenage interests pushed him to become a full-time trader. The Bombay Stock Exchange opened as Asia’s first bourse back in 1875, but even a century later India’s markets remained small-time. Finance was considered disreputable—“My mother said: ‘Who will marry you?’ But I went anyway,” he told me—while trading was dominated by cartels of brokers, and was prone to manipulation. “It was not a very transparent market, it was the Wild West,” Jhunjhunwala recalled fondly of the old Dalal Street, Mumbai’s equivalent of Wall Street. “But I always thought India would shed its socialism, and if there were new temples in India, they would be its stock markets.”
When we moved to the restaurant I asked about his approach to investing. He replied with bawdy humor. “Markets are like women,” he said: “always commanding, always mysterious, always uncertain, always volatile, always exciting!” Later on he asked me to turn off my recorder, and launched into a second lewd soliloquy about why markets were also like sex, which I promised not to repeat. I did not let on that I had heard him make a similar comparison—albeit in less filthy terms—during a bravura, finger-jabbing performance at a conference the week before, when he had conducted a screaming argument with a fellow
panelist, and won laughs by claiming that Mumbai would never succeed as a global financial center until it had better nightclubs and strip bars.
During our dinner Jhunjhunwala talked rapidly in slightly broken English, a reminder of his modest upbringings, pausing only to smoke more cigarettes, an addiction that came with a hacking cough. He ate with gusto. “I’m a foodie. I love food,” he said at one point, allowing the fact to sink in via the occasional uninhibited belch, delivered at a volume sufficient to alarm nearby diners.
All this played to his flamboyant side: the Bentley-owning financier who said he planned to buy a private jet and had thrown an extravagant fiftieth birthday party a few years before, flying two hundred guests to Mauritius. Yet there was a charming kind of modesty to him too. The Mauritius jaunt was unusual, he said, because he disliked going abroad; he had never been to America, and did not really care to go. His almost millenarian faith in India was touching too. “I became extremely optimistic about India around 2001,” he explained, in reference to the terror attacks in New York. “I thought the death of three thousand Americans wasn’t going to change the course of history.”
In 2002, he wrote an article arguing that India was “at the threshold of a secular and structural bull market,” as reforms introduced by the then BJP government began to bear fruit. “I am shouting at the top of my voice in 2003,” he recalled. “Buy, buy, buy! Sell your bloody wife’s jewelry, and buy!” It proved prescient. India’s financial markets went on a glorious five-year run, hitting a series of all-time highs. Some of his better investments, including Titan, jumped in value many times over. India flourished too: the list of dollar billionaires grew ever more crowded, Jhunjhunwala now among them.
As a pure financier, Jhunjhunwala’s place among India’s super-wealthy was unusual. There were a handful of moneymen on the Forbes list, including Uday Kotak, the self-made founder of Kotak Mahindra, a private sector bank, who lived a few streets away from Jhunjhunwala’s office. Hedge fund managers and bankers personified the West’s new moneyed super-elite, but in India it was still industrialists who dominated. But if the source of Jhunjhunwala’s wealth was a rarity, his buoyant views were more conventional, given the sense of optimism that at the time coursed through the upper echelons of India’s corporate scene.
In the later 2000s the idea took hold that India was about to enter a Chinese-style growth spurt, delivering a decade of growth at eight percent or more. Even as the global financial crisis hit in 2008, India seemed resilient. Business leaders pointed to those same underlying factors that Jhunjhunwala had mentioned. A youthful population; the self-evident need for more infrastructure investment; the benefits of a rules-based democratic system (no matter how imperfect); the palpable sense of aspiration among its people; all were core beliefs held by the Indian bulls.
The problem was that these bullish views were about to come abruptly into conflict with reality, as the season of scams began to erupt and anxiety about corruption started shooting up the political agenda. We discussed all this as the alcohol sank in, and Jhunjhunwala turned reflective. At one point he mentioned a variant of a phrase used by Andrew Carnegie, the Gilded Age steel baron, who once said that “the man who dies rich dies disgraced.” Jhunjhunwala had announced plans the year before to give away a quarter of his fortune. The move was partly inspired by the man to whom, in India at least, he was often compared: Warren Buffett, the celebrated US investor, who had cajoled the world’s wealthiest to give away more of their fortunes. There was a cartoon on the wall outside his office quoting a Buffett aphorism: “If past history were all there was to the game, the richest people would be librarians.” But I sensed that his decision had been prompted by a deeper worry, namely his desire not to be sullied by the recently declining reputation of his fellow billionaires. I asked him whether he planned to give away even more of his wealth. He seemed uncertain. “Maybe I’ll make it half, who knows?” he said finally, as if unable to escape the investor’s urge to double down.
As our evening wound drunkenly to an end, Jhunjhunwala offered me a lift home in his Mercedes, and I flopped unsteadily into the back seat. His own ambition remained the same, he told me as we were driven off, with India’s recent corruption problems still obviously on his mind. “I want to earn the greatest wealth in the world, but with the greatest practical integrity.” The business empires and inherited dynasties would all decline in time, he said, citing a Hindu proverb that wealth petered out by the seventh generation. I asked if he worried about the country’s growing reputation for corruption. “I have no dealings with the government. I haven’t taken any licenses, I don’t own any coal mines, I have no politicians as friends, I never go to a government office,” he said. “I don’t like boasting, but I have an impeccable reputation. All banks are ready to finance me.”
House of Debt
Ceejay House in midtown Mumbai was an unlikely venue for the shaming of corporate India to begin. A square, squat twelve-story office block perched on the Arabian Sea, it stood next to the main road that connected the airport to Nariman Point, where Rakesh Jhunjhunwala had his office. The location was ideal, not far from the residences of Altamount Road, and only a short hop from the Four Seasons hotel, where local financiers gathered to gossip and plot. On the building’s left there stood a showroom full of gleaming Jaguars and Land Rovers; on the right stood a slum by a fetid canal, with sewage flowing into the ocean. The landlord was a wealthy former Congress minister—one of the richest politicians of them all, it was rumored—who lived up in the penthouse. But elsewhere inside it was almost all bankers: Barclays, Rothschild, Nomura, even Lehman Brothers, before it went bust. For a time, the newspapers dubbed it “India’s most expensive office.”2 Few locations seemed more likely to be friendly to the nation’s big companies and the tycoons who led them. But it was here, in a spartan office on the ninth floor, that the rot at the heart of Indian capitalism first began to come to light.
Ashish Gupta had worked in Ceejay House since the late 2000s, when he joined Credit Suisse, the Swiss investment bank, which kept an office in the building. A stock analyst in his late forties, he spent his career working for financial institutions, developing a particular expertise in the banking sector. A slim man with black side-parted hair and an aquiline nose, he wore wire-framed glasses and talked with lawyerly precision. As head of research, his job involved churning out research notes packed with bullet points and charts. These were sent to clients on the “buy side,” meaning investment groups and hedge funds, who then paid the bank to trade stocks on their behalf. As well as poring over financial statements, this research required Gupta to attend rounds of meetings with the businesses and banks he covered. The reports tended to be dry and carefully worded. But in private conversations he could speak more freely, digging into business problems, gossiping about personalities, and picking up intelligence in return. It was through meetings like these, not long after the global financial crisis, that Gupta started hearing alarming stories about the health of some of India’s biggest business names.
“What I began to find, anecdotally, was that a lot of these big guys were struggling,” he told me in 2017, as he cast his mind back to the start of the decade, when the aftershocks of the crisis were still reverberating around the world. Around 2010, most local analysts were upbeat. Like China, India appeared to have ridden out the worst of the global turbulence, which at the time many in Asia were still dubbing the “Western” financial crisis. The reelection of Manmohan Singh in 2009 had further buoyed optimists like Rakesh Jhunjhunwala, who predicted that the prime minister would now push forward with radical economic reforms, further boosting growth. India’s industrial conglomerates were on a roll too: snapping up trophy assets abroad and pushing onwards with ambitious new investment projects at home. When he became finance minister in 1991, Singh had talked of his hopes that economic reforms could restore India’s “animal spirits.”3 As his second term as prime mini
ster began, he seemed to have succeeded.
As he moved from meeting to meeting, Gupta picked up quite different signals. At first it was just tidbits of gossip: this big industrial project was in trouble, or that tycoon had taken on debts he could never hope to repay, fiddling his books in the process. The stories came in gradually at first, but soon enough Gupta began to hear the same rumors repeated in different places. Then executives at the companies began to admit that all was not well, readying their excuses as to why. “When I was meeting these big corporates, I found few of them were very confident,” he recalled. “I decided I needed to do a deeper dive.”
The result of that research was emailed to clients in August 2012, and quickly caused ripples. Bank reports typically had dull, mechanical titles, but this time Gupta opted for something a touch more poetic: “House of Debt.”4 The crisp 35-page document laid bare the huge financial mess that India’s decade-long investment boom had left behind. Beginning in the early 2000s, many of the country’s major tycoons had gone on a serious borrowing binge, vacuuming up bank loans, layering on leverage and using the resulting funds to fire up bold new projects, from power stations and toll roads to ports and bauxite mines. Most of these projects did well, delivering handsome returns. Then, roughly around the time of the financial crisis, another round of big investments began, funded by yet more bank loans. The tycoons’ notorious love of debt even began turning up in fiction. “Leverage is flight. Leverage is a way for small to be big and big to be huge…To leverage is to be immortal,” as Mohsin Hamid wrote in his 2013 novel How to Get Filthy Rich in Rising Asia.5
The Billionaire Raj Page 23