Management Case | Eureka moment in Brescon’s turnaround path

From divesting assets to trimming the headcount, the company did everything to stay afloat
With a team of less than 20 members, Brescon Corporate Advisors (P) Ltd has helped at least 200 Indian companies restructure debt and executed transactions aggregating to over $7 billion since the last 10 years. Brescon, founded by Nirmal Gangwal, has helped turn around many companies including Gujarat Alkalies and Chemicals Ltd and some units of the RPG Group. Before becoming an independent financial advisory firm, specializing in liability management and structured finance, Brescon itself needed a turnaround.

Tough times
Set up in 1991, Brescon was engaged in many businesses including wind power, lease financing, broking and non-banking financial services by 1995. It had taken loans for its wind power business based on promises made by wind mill manufacturers on performance and output. But many wind mill machines broke; it faced problems in the leasing business as well. Gangwal found out that the loans extended by the company’s non-banking financial unit were not recoverable. Its own creditors, meanwhile, started knocking at the company’s door.

Cleaning up
The management met banks and sought a restructuring of loans with a repayment schedule of eight years. The company then started divesting assets. Gangwal, an entrepreneur from Rajasthan, also sold his personal properties—his flats in Mumbai and Ahmedabad. The company exited most of its businesses. It trimmed headcount to stay afloat. It surrendered its broking licence. As against the promised eight years, the company repaid the loan in two years. By 1999-2000, the company’s balance sheet was debt-free.

Finding its true calling
While Gangwal and team were restructuring their company’s loans and cleaning up the mess, they had a eureka moment. The company started studying the balance sheets of other companies and voluntarily started suggesting restructuring solutions to them. It found out that a unit of a large conglomerate had troubles with its balance sheet. Brescon’s management offered an innovative solution. The conglomerate got out of trouble and Brescon received its first cheque for advisory services.

The future
There exists a strong business case for Brescon today. By the end of December, 40 listed Indian banks had gross non-performing assets (NPAs) of Rs.2.52 trillion, up 21% from Rs.2.08 trillion a year ago. In addition, an estimated Rs.5-6 trillion of loans are being restructured in the banking system. Under existing norms, banks need to set aside up to 100% of the loan value if a loan turns fully bad and 5% of the loan value if restructured. “The system must understand that not all business ventures always succeed or perform as per expectations. The same businesses though, once supported adequately during the lean period, in a more congenial business environment, can turn around and add to national prosperity. Hence, mantra for liabilities management could be—detect early, admit completely, support entirely and thrive surely,” Gangwal says.