Turning Steel into Fool’s Gold: Sanjay Singhal’s Reverse Alchemy

The Bhushan empire was founded by Brij Mohan Singal, who started selling door hinges and rail fasteners in the 1970s. It grew through several smart acquisitions and by the time Bhushan Steel & Strips (different from Bhushan Power & Steel) went public in 1993, it had earned a reputation for quality.

Also read: Vijay Mallya’s short-lived pizza empire

But in 2002, one of his sons, Sanjay Singal, decided to strike out on his own, leading to schism and infighting. This situation lasted until 2011, when a truce was reached in the family settlement agreement and Brij Mohan and his son Neeraj retained the legacy business.

Sanjay Singhal founded Bhushan Power & Steel (BPSL) and expanded rapidly. Over the next 15 years, he allegedly turned his company into a financial deception laboratory. The story of how one man’s ambition created a multi-crore rupee hole in India’s banking system is still being circulated in Delhi’s corridors of power.

The shamelessness behind the numbers

However, numbers only tell half the story. The other half is what Sanjay Singal calls the audacity and complexity of his efforts. By 2015, even as the company was rife with accusations of malfeasance, his personal fortune was soaring. His net worth was estimated at $1.1 billion on the Forbes billionaires list that year. He owns properties in many high-end neighborhoods of Delhi and Mumbai and owns a large collection of luxury cars. He was closely associated with the rich in Delhi society and his parties attended by top Bollywood stars became the talk of the town.

By then, BPSL was already one of the largest steel producers in India. In 2013, the company’s sales were $8,670 crore and net profit of Rs. $571 Crores. At that stage, another unnoticed figure – net debt – had climbed to $24,810 Crores. The company is growing aggressively, building steel plants and exploring for coal in faraway Australia.

Also Read | Vinod Khosla: Silicon Valley’s persistent provocateur

Funding mainly comes from banks. Plus Bhushan Steel’s debt $31,000 crore, making it one of the most indebted industrial conglomerates in India. By 2014, plummeting steel prices had reduced profits to just $62 crore, even though the company spent more than $Annual interest payments alone amount to Rs 1,600 crore. Its stock price plummeted.

So far, banks have sounded alarm bells demanding repayment and investigative agencies such as the Central Bureau of Investigation (CBI), Enforcement Directorate (ED) and Serious Fraud Investigation Office (SFIO) have also started probing the case. In 2017, the State Bank of India dragged the company into bankruptcy court, and soon the worm started to crawl out of the can.

What a tangled web we weave

In court, the agencies showed how BSPL used false documents to obtain letters of credit, forged supplier payments, transferred funds to other companies and obtained loans from multiple banks for the same purpose. At the heart of the alleged fraud were multiple shell companies sharing a common address, registered in multiple states, and with employees and relatives serving as directors.

The agencies said the companies had no real business operations and were used to open multiple accounts at multiple banks. Money flows through these shell companies, forming a complex web of transactions. Documents later filed in court cited the round-tripping of funds, over-invoicing of imports, under-invoicing of exports and manipulation of letters of credit. There’s also the mandatory stock market angle, with shell companies allegedly manipulating the market by creating artificial trading volumes and conducting circular trades to manipulate stock prices.

Also read: The multifaceted legacy of advertising genius and theater pioneer Alyque Padamsee

Finally, the Department of Education arrested Sanjay Singal in 2019. India’s Central Bureau of Investigation (CBI) has also filed criminal charges against him, accusing him of massive bank fraud. BPSL goes bankrupt and is acquired by JSW Steel $In 2021, one of India’s largest insolvency resolutions will receive funding of Rs 19,350 crore. Needless to say, banks made drastic cuts on lending. The original Bhushan Steel met a similar fate, with Tata Steel acquiring the bankrupt company from the creditors committee in 2018.

While Bhushan Steel also faced multiple charges, the Supreme Court in September ordered the release of Neeraj Singal in a case filed by the education ministry for alleged money laundering. $46,000-crore bank fraud case on the grounds that procedures were not followed when arresting him.

Criminal proceedings against Sanjay Singhal are ongoing, but the vast Bhushan empire built by his father is in ruins. Its rise and fall follows a familiar pattern of corporate India, which is to overextend through aggressive bank borrowing and eventually collapse.