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Trouble Inc.

Trouble Inc.

WHEN Manu Chhabria barged into the top-10 industrialists’ club in the mid-’80s, few had heard of him. But by then he had already acquired two blue-chips, Shaw Wallace and Dunlop India, along with a string of lesser firms. Both were offshore purchases through leveraged buyouts (bank loans).

Chhabria acquired Dunlop jointly in 1984 with R.P. Goenka, and became the single largest shareholder when he bought out RPG’s stake after the two fell out. Three years later he won Shaw Wallace, ending a two-year battle with its professional chairman, S.P. Acharya. By 1989, the media was calling him the ‘takeover tycoon’. The college dropout and one-time small trader in Mumbai’s Lamington Road had leapfrogged into the big league.

In the ’90s, Chhabria’s fortunes began to dip. His grandiose diversification plans did not take off. Acquisitions like Genelec proved duds and funds were stuck in unsuccessful bids such as L&T and Gammon Engineering. As a result of RBI’s Group Concept, the Chhabria companies had to raise capital from the market at exorbitant interest. Production in cash-starved firms like Dunlop fell and the group’s image was tarnished for defaulting on ICDS and fixed deposit loans. The biggest blow was the charges of fund siphoning from Shaw Wallace.

Meanwhile, Chhabria had made a lot of powerful enemies. Liquor baron Vijay Mallya was said to have financed 50 per cent of the buyout of R.G. Shaw, Shaw Wallace’s foreign holding company. When Chhabria refused to acknowledge Mallya’s claim, he kept quiet for fear of FERA. Recently, two Hong Kong-based firms (reportedly controlled by Mallya) sued a Chhabria-controlled firm for breach of faith, saying they had financed 50 per cent of the R.G. Shaw acquisition and, therefore, held 50 per cent of Chhabria’s equity in Shaw Wallace. The case has been admitted in the Calcutta High Court. People close to RPG say Chhabria double-crossed him during Dunlop’s overseas acquisition.And by nibbling at L&T, Chhabria stepped on Dhirubhai Ambani’s toes as the latter was on the verge of a takeover.

Perhaps his most dangerous enemy is his younger brother, Kishore, who was mainly responsible for delivering Shaw Wallace to him. Chhabria rewarded him by appointing him as the managing director but did not give him any stake in the firm. In 1990, he sacked Kishore claiming he had assigned some best-selling liquor brands such as Officers Choice to a firm called BDA without his knowledge. Thereafter, the brothers have been locked in legal battles, most of which have been won by Kishore.


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