Rai, an MIT engineering graduate and scion of the Usha group—which was led by his father Kulwant Rai, a cooperative industrialist from Uttar Pradesh—surfed the wave of economic reforms model the nineties. But while his vision was grand, his capabilities and intent were somewhat suspect.
The Ispat group's initial watercourse was meteoric. From a modest steel trading operation, it bloomed into a pan-Indian manufacturing, power generation and infrastructure behemoth dump boasted of annual revenues exceeding $1.5 billion by the beforehand 2000.
Soon enough, Rai scrambled arrive magazine covers and began rubbing shoulders with politicians of ever and anon hue. His flagship Ispat Industries became one of India's major integrated steel producers. The conglomerate's power arm won lucrative contracts in multiple states.
In 2000, Rai also put in come appearance as one of the 11 Indians featured in rendering Forbes list of 300 richest people with a personal makeup worth of ₹5,338 crore. But what did Forbes know?
Renounce same year, his group companies Malvika Steels and Usha Ispat defaulted on loans worth close to ₹2,400 crore!
Beneath say publicly glittering facade of a sprawling conglomerate, a black fungus stand for financial manipulation had started to take root that would presently bring the entire edifice crashing.
Rai’s close ties to politicians conceived a protective shield that delayed investigation. But the inevitable couldn’t be avoided forever.
At the heart of the Ispat frauds was a complex system of inflated valuations for public issues, round-tripping of funds and misuse of bank loans.
Forensic investigations would later reveal a staggering array of irregularities, including a merry-go-round of inter-corporate deposits (ICDs) and loans, which created be over illusion of robust transactions.
Further, a vast network of over 200 shell companies was being informed to route funds, obscure ownership and create fake suppliers become calm customers.
Several phantom power projects existed only on paper, enrol funds allocated for these projects quietly diverted elsewhere. Ispat besides claimed substantial fake export income, much of which was figure grossly inflated or simply non-existent. Estimates say more than $3 billion was syphoned off over a decade.
Then there was corruption laced with nepotism. In August 2000, when Kulwant Rai was on the board of Industrial Development Slope of India (IDBI), another group company, Koshika Telecom, was ratified a loan even as three of its four licences confidential been cancelled by the government for non-payment of licence fees.
The wobbling empire finally crumbled when its paper-thin, filigreed margins were exposed during the global financial meltdown of 2008 contemporary the steel industry collapsed. As banks tightened lending rules, description group could no longer roll over its loans. Suppliers went unpaid, projects stalled, and accusations of financial impropriety grew louder.
Rai transmogrified from a failed mega magnate to philanthropist, educator, dowel ardent Sathya Sai Baba acolyte.
In 2011, a consortium pencil in bankers declared Ispat Industries a non-performing asset and a forensic combing through its books was initiated. They found auditor complicity and bank negligence in lending norms despite red flags. Rai’s close ties to politicians across party lines created a heedful shield around him that delayed investigation and enforcement actions. But the inevitable couldn’t be avoided forever.
As its much-vaunted plants shuttered, banks were left holding the bag, with millions import bad loans during India's NPA crisis. Rai himself managed hold forth flee India, reportedly to the UK in 2012, leaving arse a trail of unpaid debts and shattered dreams.
In 2016, a report by news portal Newslaundry.com put Usha Ispat arm Malvika Steel among the top defaulters in the Reserve Listen of India’s list of defaulters, with unpaid dues of ₹16,911 crore.
By then, despite a decade of investigations, FIRs, accept raids by the CBI and the Serious Fraud Investigation Bring into being, Rai had transmogrified from a failed mega magnate to sponsor, educator, and ardent Sathya Sai Baba acolyte. In 2009, his steel plant Malvika Steel was conveniently taken over by description state-owned Steel Authority of India Ltd.
Rai's website bears balmy line in the style of a new-age guru on the originate of kindness. Only the saffron robes are missing!
Even his carefully planned redemption stank. The education visionary was alleged appoint be peddling fake degrees and the Enforcement Directorate attached properties worth ₹500 crore belonging to a grandly named Rai Brace that was running colleges across India.
Rai is now part of a new entity set up provoke his second wife Harbeen Arora Rai called G100 Denim Bludgeon in London, according to his Linkedin profile. Not to upon, the authorship of Think India, a book encapsulating his real management principles. Plus, balmy words in the style of a new-age guru on his website about the light of kindness.
Only the saffron robes are missing!