Least Respected: The Not So Respected

It is but natural that if one does a survey amongst senior managers and CEOs to home in on the most respected companies, one should also look at the flip side, the least respected companies. The ‘respect’ a company commands is more than just the revenue figures and the quantum of profits. It is about consumer satisfaction, about transparency and the ethics of doing business; and about the depth of talent and innovation a company represents. While these were measured and responses sought for the most respected companies in earlier years, the current survey has turned out to be all the more exciting because for the first time respondents were also asked who they thought were the ‘least respected’ companies. The results that have been thrown up have some expected names; but it has some surprising inclusions as well. First, let’s take some expected top listers.

Collapse From a High
It probably comes as no surprise, and every bit of the opprobrium is well-deserved for Kingfisher Airlines to have been voted the ‘least respected’ of the companies surveyed. The Vijay Mallya and UB Group promoted airline started with a bang in May 2005 and in the early years raised consumer and market expectations sky-high. It had a set of spanking new A-320 aircraft and experimented with the ‘Kingfisher Class’ that offered flyers better-than-economy seats and services.

It seemed in the beginning the trajectory for the airline was only upwards. It acquired the beleaguered Air Deccan from Captain Gopinath renaming the budget airline Kingfisher Red; and with it came 71 aircraft and a carefully nurtured regional market that linked tier 2 towns like Hubli and Madurai with the national grid. The acquisition of Air Deccan also gave Kingfisher the required five years to start international services, and from 2008 it began flying abroad.

But it was the well-orchestrated hype and hoopla about the airline and its promoter the ‘King of Good Times’, that made the fall even harder. By 2011, Kingfisher Red, was shut down. The airline never reported a profit in any year, and its cumulative losses by 2012 had exceeded $1 billion. The airline stopped flying after oil companies refused aviation fuel on credit, and by October the same year its flying license was suspended and ultimately scrapped. But more than the losses and collapse of the airline, it was the shoddy way the airline’s over 5,000 employees were treated, and the opaqueness with which consumers and creditors were handled. The way it did business eroded the brand of both Kingfisher Airlines and its promoter Vijay Mallya. Employees were deliberately locked out without wages for months, and promises of payment were repeatedly broken. By 2014, many of the 17-bank consortium of lenders had labelled Mallya a ‘wilful defaulter’, and today the Rs 7,000 crore or more owed to these banks is possibly among the highest of corporate non-performing assets (NPAs).

It is therefore no surprise that when, Vijay Mallya, at the United Spirits AGM in November 2015, said his focus was on settling the debt of the airline with banks, he was greeted with silent cynicism.

Jailhouse Jitters
The Sahara Group, that is No.3 in the list of ‘least respected’ companies, is another expected pick. Well-publicised images of the chairman of the group, Subrata Roy Sahara, in Tihar Jail since March 2014, is hardly expected to evoke anything but a negative reaction. Roy remains in jail for his inability to raise Rs 10,000 crore, the highest-ever bail bond posted by an Indian court.

Most of what Subrata Roy Sahara built was a house of cards. Starting as a small chit fund in 1978, Roy built Sahara India Financial Corporation (SIFC) into a money generating machine by the turn of the century. Rough estimates put his collection from ‘small investors’ at Rs 2.25 lakh crore by 2008, the year SEBI stepped in and banned SIFC raising money as a residuary non-banking financial company (RNBFC). It was a bit of a ponzi scheme, with money from one set of investors paying the high interest and principal of the first lot of investors. But somewhere the chain broke, resulting in heartbreak and violence. After a long-fought battle in the Supreme Court, a bench directed Sahara to return the Rs 24,000 crore, including interest, to lakhs of small investors. The company only managed Rs 5,120 crore in cash and bank guarantees.

Another part of Roy’s business which was launched with much fanfare was Air Sahara, among the first private airline that launched in 1991. However, with accumulating losses, the group exited in 2004, signing off its aviation assets and planes to Jet Air for Rs 2,000 crore. Again, the much tom-tommed land assets of Sahara, claimed on its website to be over 33,000 acres of land banks, and worth over Rs 70,000 crore, turned out to be a chimera. Though the company did hold assets, the titles were not in its name, and possession of the land holdings were through complex layers of powers of attorney and dubious sale deeds. It is no wonder the group has failed in selling any of these assets to raise the required bail bond. As of now, with interest, the demand on Sahara has mounted to over Rs 40,000 crore; and it is unlikely the company or its promoter can find its way through this mess.

Both ‘Most’ and ‘Least’ Respected
There is also an unexpected inclusion of Reliance Industries (RIL) at No.2 in the list of least respected companies. It is indeed a piquant selection since another set of respondents from the same pool chose RIL as No.4 of the most respected companies. A set of 503 respondents (see methodology) were asked in unprompted responses to name both their ‘most’ respected as well as ‘least’ respected company. RIL was a unique case standing out in both the positive and negative list. While 28 respondents selected RIL as the most respected company giving it 6 per cent of the vote and slotting it at No.4 just below Google India. In a parallel exercise, as many as 17, again 6 per cent, voted RIL as the ‘least respected’ below King­fisher Airlines that gathered 19 votes. Of the 503 respondents, 238 refused to name a ‘least’ respected company.

Reliance Industries is not an ordinary giant. It is the largest private sector company in the country with businesses across refining, oil and gas exploration, retail and telecommunications. Its annual report for FY 2015 reported a humungous annual revenue of Rs 3,88,494 crore, and a net profit of Rs 23,566 crore. It accounts for 148 products and brands across energy and services sectors, and is the 2nd largest producer of polyester fibre/yarn globally. It is a company with high visibility and impacts the country’s economy in a major way.

It has everything going for it. So why are perceptions about RIL low among a certain set of corporate persons? Difficult to say. After the death of Reliance group patriarch and chairman Dhirubhai Ambani in 2002, ‘ownership issues’ emerged in 2004 between the two brothers Mukesh and Anil Ambani, finally leading to a split in the business. There was also a long and bitter court battle on what price RIL should sell gas to Anil’s Reliance Natural Resources, which the Supreme court settled in RIL’s favour. Thereafter, there have been controversies in respect of natural gas pricing and ONGC moved the Delhi High court in 2014 claiming RIL was pilfering gas from ONGC’s reserves in the Krishna basin. These highly publicised disputes could have contributed to a negative image.

On the other hand, the company is also seen low in consumer engagement. Except its chain of retail stores, most of the heavy duty businesses are not consumer-facing. The company and its chairman are also known to be publicity shy and do not have a high level of interaction with the media.

gurbir@businessworld.in
@tabonyou

(This story was published in BW | Businessworld Issue Dated 11-01-2016)