By Ruma Dubey

The fall of a name like Dunlop is painful. It goes on to show how a few bad decisions, lack of will to adapt to changing times, poor management, has sounded the death knell for this high brand equity company.

On 31st Jan, 2012, Calcutta High Court,   ordered the winding up of Dunlop India, asking the official liquidator to takeover the possession of the company’s assets and its books of records. The liquidation petition had been moved for non-payment of dues of around Rs.1,000 crore. This apart, the Court stated that the company had sold assets worth Rs 2,300 crore in a fraudulent way and it was unable to show how it planned to carry out business in the near future.

A day later news floated around that the Trinamool Congress Govt at Kolkatta might actually participate in the bidding process to acquire the firm "in the interest of workers". Would that be good news or even worse news?

But what a fall from grace this company has seen. A big mess today, it was a company to reckon with till a few years ago.

In 2006, Pawan Ruia was hailed as a hero, a knight in shining armour for Dunlop and scores of its employees. Today, he is painted to be more of a villain and the employees are cursing the very day he decided to takeover Dunlop.

Less than a year ago, Dunlop, on 20th May 2011 touched a new 52-week high at Rs.66 and today it is at around Rs.6 levels, locked on the lower circuit, with only sellers. Thus within a span of 6 years, the company and its owner have done a complete turnaround. From hopes of running at full capacity, both the units of the company, at Ambattur in Tamil Nadu and Sahaganj in West Bengal have shut down  and the court has ordered liquidation, and it has appointed a provisional liquidator to take stock of its assets, while barring the company management from selling any property of the tyre maker.

This complete collapse, many have blamed it on Pawan Ruia. It is largely said that his obsession to bring down debt by selling assets, slowly stripping down the assets of the company had led to the complete closure. When Ruia took over in 2005 from Chhabria’s Jumbo group, it was a BIFR case, with total liabilities of Rs.650 crore and by selling assets, as at March 31, 2011, it had unsecured loans of around Rs 272 crore and secured loans worth Rs 48 crore in its books.

Ruia’s first visit to the factory after he took over, he won the confidence of the factory workers and when he reopened the factory in 2006, every family member of the labourer was there to welcome him. Such was the hope which people had on Ruia; after all he was the man who had turned around PSU Jessop & Co in 2003, Falcon Tyres in 2005 and then later, in 2008, also Maharashtra’s Monotona Tyres. He got Dunlop out of the purview of BIFR in 2008 by revaluing its fixed assets at current rates, resulting in a gain of close to Rs.600 crore in its reserves. Its net worth turned positive at Rs. 242.65 crore.

But soon, Mr.Ruia started selling off ‘non-core’ assets. In Feb 2008, he decided to sell its Dunlop House property at Worli, Mumbai to Bhartiya Hotels, for Rs.150 core, which is a 100% subsidiary of Dunlop. He sold off more property to wholly-owned subsidiaries, citing the reason to be for better and optimum utilization of core assets of the company. He sold around 178 acres in Sahaganj to Dunlop Infrastructure for Rs.60 core; around 60 acres in Goa to Dunlop Estates and around 58 acres in Athipattu to Dunlop Properties for Rs.80 crore. So this was a cool Rs.350 crore, all cash less transactions with subsidiaries. The subsidiaries paid for these properties in shares issued to Dunlop at around Rs.1000/share. More importantly, valuation of these properties was done arbitrarily, without any official valuation.

Thus Ruia was busy siphoning off assets of the core company to worthless subsidiaries while he was doing nothing to get the two plants – Ambattur and Sahaganj to work at full capacity. The production remained erratic throughout and though both had an installed capacity of 90 tonne per day, it was never ever, on an average over 45 tonne per day. Infact in March 2008, the West Bengal State Electricity Distribution Company stopped supply to the unit for not clearing dues.

In 2008, following Madras high court’s verdict, stating that Dunlop was no longer a sick company, the Appellate Authority for Industrial and Financial Reconstruction finally released the company from the BIFR purview. Following this, the company mortgaged its Worli property and Athipattu land with ICICI Bank, which lend money to the the company, or rather the subsidiaries which are basically shell companies with little or no business. ICICI Bank agreed to lend around $15 to $250 million. Why were these properties mortgage? There is no record nor does one know what was done with the money from ICICI Bank. Many say, it was used to fund many of Ruia’s acquisitions in Europe - six auto component manufacturers in Germany, France, the UK and Turkey since 2008; today over 50% of the Ruia group’s income comes from business abroad and it is reportedly a Rs.7500 crore group.

Not just property, workers at the factories are accusing Ruia of dismantling machineries and selling them off too and Ruia’s decision to step down was a strategy to distance himself from the company.  

In Dec 2011, the company put its Worli property on the sale block and hoped to raise Rs.400 crore. This is same property mortgaged with ICICI Bank. And there is news that in Tamil Nadu, where the company has surplus land, it is planning to either sell off or jointly develop the property and realise around Rs.700 crore. The feeling is that despite all this, Dunlop might get ‘rescued’ by the West Bengal govt and it could reap benefits of these property sales. And if it does not get rescued, there is still murmur of realty development.

Yes, the market is essentially a capitalist and its traders are waiting to swoop like vultures on the carcass while investors have quietly moved out, letting the troubled soul rest in peace.