Imagine constructing India’s biggest airports by coming from a rural Land lord family. Most of the GVK family was dependent on agriculture. Having rural ethnicity, they moved to urban centers like Chennai to Hyderabad, making their livelihood. GVK's father was an engineer working as a local contractor. Eventually, he joined his father’s business.
In his initial days, life was tough while doing local contracts for village canals and streets. As time moved ahead, GVK started gaining recognition and getting contracts for tunnels and dams. The journey became even more challenging and responsibilities increased with time. While constructing one dam, during the rainy season back then, GVK did not back down and built world-class dams without caring about rains. His ability to take risks and deliver construction on time made him a well-respected contractor. All the government contracts were coming towards him. Eventually, GVK group began working on road construction, power, hotels, wood, biopharma, research and finally airports.
This mammoth rise of GVK group was unimaginable, making it one of the top companies in the world. In the power sector, coal was an important aspect but in India it was not available and had heavy restrictions. So, GVK group bought Australian coal mines for 12,000 crores, including import procedures. Which gave access to build a massive power sector expansion in India. When the government began the PPP model for airport construction across India. GVK group obtained Mumbai Airport in the bid, making it one of the successful achievements. When they built, it got international recognition for its design and architecture. GVK group became one of the world's most popular in the aviation sector, eventually obtained stakes in Bangalore airport also.
The Downfall and debts.
GVK groups business are high risk and high progress, which makes it tougher to manage. Their operation requires huge financial capital and it is a time-taking procedure, which creates heavy dependency on banks. As most of their business models are public private partnerships, GVK group has handled everything from construction to operations, making it expensive. Sometimes, the amount which they expected in return wouldn’t match their expectations. Even projects and construction would extend beyond the delivery date, making it even more expensive for operations. These road blocks have created massive debts for the GVK group.
Slowly, one after another, they kept selling major assets to Adani group, eventually exiting from the aviation sector. Once upon a time, the sector which gave them a big reputation, now they no longer exist in that sector. From loans to debts and eventually increased interest rates. The share price was about 90 rupees and fell to 2 rupees, making it a 97% drop in the share price. Making their journey difficult, they began with local construction contracts to building world-class airports and eventually debts. We can learn that debt can be very harmful in business from the GVK groups story.
