In a telephonic interview with BusinessLine, Ritesh Bawri, founder and former Managing Director of Calcom Cement India Ltd, details the “economic value destruction” by the Dalmia Group in Calcom.

Why did you decide to partner with Dalmia and not sell Calcom to them upfront in 2012?

At that point, one possible decision was to sell 100 per cent of the company to Dalmia, the other was to partner with Dalmia. The belief at that point was that there is tremendous value creation that was possible with Calcom.

There is another company called Star Cement that is at 2.7 million tonnes, Calcom is at 2.1 million tonnes. That company made over ₹400 crore of EBITDA and they are on track to report ₹600 crore of EBITDA in 2015-16.

We had tremendous advantages - we were very strategically located, we had the best mines and had the government's support as an investor. So our belief was that the next three-four years would be very good for the company. And so, when they said, let's create value together with two business families joining, and I'm in management and could run the company with the assistance of the Dalmias, there was no reason why that value could not be created.

Why did you hand over more control to the Dalmias later?

This is a classic bait-and-switch. They entered the company by promising this and valuing the company (at a certain amount). Calcom is a dominant cement player in the North-East. Evidence will show that they starved the company. It came to a point in October 2012 where they were going to default on salaries. For us, it was a choice between letting the company die after having done a corporate debt restructure and smearing our reputation with the entire banking fraternity or giving up management to them. Effectively, it was like a gun to my head.

Have the banks responded to your letter revoking the guarantees you had given for Calcom?

Axis Bank has called a consortium meeting of all the banks saying the Bawri family wants to revoke its guarantee. A guarantee is typically irrevocable so in theory, I can't revoke it unless there is some external circumstance.

We've written to them saying here is somebody who is plundering the company and I can't be standing guarantee when they are not even willing to listen to what I'm saying. Technically, my claim for revoking the guarantee is deficient.

But it puts the ball in Axis Bank's court saying you either take action or you remove me - you can't have both.

Do you think this will be resolved only in court or there can be an out of court settlement at some point in time?

If you look at the timeline, my problem with the Dalmias started in August 2012, after three-four months of them investing with us. I waited till 2015 before I went into litigation with them.

I don't think anybody in their right minds would want to fight the Dalmia family and my intention was never to fight. We have fought because we had no other choice but to fight. So, if there is an out-of-court settlement, as a family we would welcome it.

For valuation, the best benchmark I can give is that Star Cement (which is located in the same area) is valued at ₹4,000 crore.

At even 70 per cent of that, we are at ₹3,000 crore. But I can't sell a company to somebody and then have them walk away with it for free. That's absurd.

Related Topics
comment COMMENT NOW