The Kolkata Flyover Collapse And Andhra-Style Crony Capitalism

Generating outrage in social media and on television screens is perhaps as easy as Virat Kohli chasing a target. Soon after a section of a flyover under construction in Kolkata collapsed killing dozens and maiming many more, a senior manager of IVCL was quoted philosophising that the tragedy was an act of God.

IVCL is an infrastructure firm constructing that flyover, a task that many have been valiantly striving to complete since 2009. IVCL shares tanked in the stock markets after an outpouring of anger against the company. There have been political recriminations and fulminations too. But let's stick to business, as they say.

The tragedy and the spotlight on IVCL actually point out two things: First is obvious; Indian infrastructure companies are buried in debt and that is reflected in “stressed assets” of banks. The second is intriguing: how so many “infrastructure” companies emerged over the last two odd decades from Andhra Pradesh. First stressed assets. According to official documents, the promoter of IVCL Sunil Reddy has pledged his entire stake to lenders and de facto owns zero percent of the company.

Some time back, the Essel group promoted by media magnate made an unsuccessful attempt to take over the company. But it is lenders who actually “own” the company. IVCL is not unique. Other infrastructure companies and groups like GMR, GVK and Lanco are also saddled with seemingly unmanageable debts. A financial analyst can spend delightful weekends going over their balance sheets.

The intriguing thing is how all these companies have emerged from Andhra Pradesh (including new Telengana). Most of these companies flowered, flourished and eventually floundered under the 10 year old UPA regime between 2004 and 2014. GMR and GVK became surprise winners during the bidding for privatization of airports of Delhi, Mumbai, Hyderabad and Bengaluru.

Imagine just two little known companies winning those bids, beating big ticket players like Airtel and Reliance. In fact, Airtel founder Sunil Bharti Mittal actually wrote an oP Ed piece in Hindustan Times after GMR won the Delhi airport bid. During that phase, the companies won a lot of bids to construct highways and implement other infrastructure projects. By 2008, like DLF, they were media stars. Lanco was not too far away.

If you believe conspiracy theories, all this changed after the then Andhra chief minister Y V Rajasekhara Reddy was killed in a helicopter crash in 2009. His son Jagan Reddy became a rebel and spent a long time behind bars on various charges. Simultaneously, the fortunes of these Andhra based infra companies started plummeting. Of course, the policy paralysis and the economic despair in the later part of the UPA regime might have to do more with their fortunes. But there can be no doubt that the host of infra companies that emerged from Andhra in the 21st century have lost their sparkle.

The most telling and hilarious example was L. Rajagopal, a Congress Lok Sabha MP from Andhra who became notorious after using pepper spray inside the Parliament in 2014. He is also the founder of Lanco, a company in debt a deep trouble. Perhaps this deserves a more in depth and best researched story about crony capitalism, Andhra style?