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Pankaj Oswal and India-Australia business March 15, 2011

Posted by southasiamasala in : India, Stoddart, Brian , trackback

Brian Stoddart

When Pankaj Oswal arrived in Perth early in the new millennium, along with wife Radhika, the pair was immediately the focus of speculation, curiosity, envy and suspicion in about equal measure.  They were young, obvious, ambitious and daring – he was aiming to create a $1 billion ammonia fertiliser factory on the Burrup Peninsular in the northwest next to Western Australia’s massive natural gas reserves.  The gas would provide the considerable energy needed to create the product.  Oswal swept aside the problem that his site just happened to be home to one of the world’s prime rock art concentrations, while Radhika moved towards creating a worldwide vegetarian restaurant chain.  Together, they became famous for their parties and the general lifestyle of the rich and famous.

It was not all straightforward, though.  There were immediate questions about how a twenty something had the $300 million that allowed him to leverage the huge loans needed to get his enterprise going.  Diligent journalists in both Australia and India lit on the information that he was the grandson of one of the great Ludhiana textile magnates but, even more significantly, the son of Abhey Oswal who had moved from textiles to fertilisers.  Suspicious minds thought the son’s stash might just have emanated from the father’s labyrinthine commercial deals from which some investors emerged much the poorer financially.  Pankaj Oswal, however, consistently denied that source, instead usually citing rich investors/friends.

One of those was definitely Vikas Rambal who came to Australia both as an investor and as an executive officer in what became Burrup Fertilisers Pty Ltd.  Rambal became known as a great cricket enthusiast in a city where the game is a major social feature, and developed his own circle there.  Oswal and Rambal fell out spectacularly, and the matter ended up in the WA Supreme Court but was settled privately, Rambal thought to have ended the business partnership in return for perhaps some hundreds of millions of dollars.  He promptly established his own fertiliser venture south of Perth, but left unanswered was his allegation of tricky financial dealings inside Burrup.

The Burrup show rolled on, though, Oswal extending his investments into Chinese shipping ventures among others while dealing with misfortunes like a gas plant explosion that cut supplies to his facility, and a hike in gas prices that made some of his initial calculations look sick. By now he had another problem.  He owned, apparently, 65% of the venture, mainly on the back of an $800 million credit facility from the ANZ bank.  The other 35% was and still is owned by Scandinavian-based fertiliser conglomerate Yara, by now decidedly uneasy about its dealings and relationships with Oswal, again raising suggestions about irregular financial dealings and threatening further legal action.

By 2008, though, the Oswal enterprise was all apparently so stellar that its owner indicated he would float the company, and Australia’s corporate sector geared up.  The wider investment community would now have the opportunity to jump in on the bonanza.  Perhaps fortunately, in hindsight, the Global Financial Crisis promptly arose, the float was cancelled.  The idea was reprised subsequently at least twice, but with less enthusiasm as doubts began emerging on some aspects of the business.

The Oswals were in full flow, though.  Wherever the money came from, they paid out $22 million for four building blocks in Perth’s premier riverside suburb, and proceeded to construct what was said to be a $70 million house complete with cinema and other necessary appurtenances.  Inevitably, it became known as the “Taj Mahal on the Swan” in a not entirely warm local reflection on the Indian connection.  The conspicuous consumption was one thing, the industrial and commercial stoushes another entirely.  One concerned the Taj: Radhika tried to ban workers from eating meat on-site and the unions objected.  It was front page news.

Another more serious one concerned the rent of an office block in the Perth CBD for one of what seemed an unending stream of Oswal company spinoffs.  Again ending up in court, the building’s management claimed Oswal parties had reneged on almost $1 million of due rental.  Oswal denied it, but the word was out along St George’s Terrace, Perth’s legal and commercial artery, that something was not quite right.  That stood reflected in Oswal not ever being at the heart of the Perth business elite: as a major state investor from Asia, for example, he did not feature in a government-sponsored high level conference designed to improve such Asian foreign investment in WA.

By late 2010 both Yara and the ANZ were nervous to the point of action.  Oswal’s share in Burrup was put into receivership, and he and his family left Perth on their private jet to pitch up first in India and now, apparently, in Dubai where he has yet more business interests as well as in Oman.  From there have come a string of suggestions that his empire will be sold out at rock bottom price to some local interest like the Wesfarmers conglomerate, that it is all a big misunderstanding, and that he has not yet had a chance to tell his side of the story.

That story is getting even more interesting however.  ANZ wants its $800 million back, and looks like doing better than that with the sale of the Oswal Burrup interest, because at least it is a going concern with a product at a time when fertiliser is in-demand globally.  Yara is looking for a more straightforward majority owner.  The receivers have already gathered Oswal’s 17 luxury car collection that includes a Bentley and a Porsche Cayenne.  Then there is the $2.7 million boat, and the $40 million, 76 hectare acre land block in Baldivis to the south of Perth, said to be in readiness for subdivision to meet Perth’s voracious property appetite fuelled by the mining boom.  After delivering the family from Perth, the $30 million Gulfstream jet arrived back to be impounded by receivers.  The Taj on the Swan is up for sale.

The issue around many of these assets now is the precise source of the funds that bought them, the clear suggestion being that the Oswals used company funds to make private purchases, a clear breach of Australian commercial and tax provisions.  As even some Indian sources are now saying, provisions around this point are probably a lot stronger in Australia than in India, and it is likely Oswal paid too little attention to that point.  Certainly, the situation now is that the receivers are pursuing at least $110 million from Oswal, over and above the ANZ monies, on the grounds that they were company funds used for private purposes.  There are likely to be a string of creditors emerging, because debt payment by Oswal connections was notoriously slow.   Some of the in question purchases are trivial and comical, like the funds transferred to an Indian hair transplant firm.

The term comical is apposite, because it now emerges that Radhika had recently changed the name of her restaurant chain holding company to Comical Ali Militant Vegetarian Pty Ltd.  Comical Ali, of course, was the nickname given to Sadaam Hussein’s information Minister who insisted until the last that all was well.  Even more oddly, though, some Oswal insiders now say that Comical Ali was the name they used for their boss behind his back, referencing his quixotic and unbending approach to major issues.

Radhika is emerging as an even more important figure.  Last week she won a stay in the Victorian Supreme Court, delaying the receivers’ access to her email account on the Burrup corporate server, the grounds being that her activities were irrelevant to company proceedings.  Another revelation undercut that claim sensationally.  It now appears that the Australian Tax Office is seeking $140 million from Radhika, on the grounds that in 2007 Pankaj had “gifted” her 35% of his holding.  Her stake also involved ANZ loan monies and a provision by ANZ that she was prevented from selling a large swathe on the grounds that it was part of a guarantee arrangement.

Astonishingly, Pankaj Oswal is now claiming to have been assaulted by an ANZ employee during negotiation of several matters, and the bank has issued a denial.

Oswal has promised to return to Australia and tell all, and to set the record straight.  When that might be, however, is not entirely clear, and the next stage in the receiver saga will occur in court on 12 April.  Given the story so far, there may well be further interesting details that will then appear.

The largely unvoiced background here is that in some quarters the Pankaj Oswal case may well have an impact on the wider India-Australia business relationship.  One clue to this lies with some vitriolic to the point of rabidly racist references to the Oswals on web message sites, and the guarded whispering campaign that was abroad in Perth in the lead up to the recent developments.  The India-Australia relationship and development is corroded by this, despite the innumerable positive and unheralded enterprises now occurring.  This is media fodder of the most negative kind to help feed the popular misconceptions about foreign exploitation and high handedness. The two key caveats here, of course, are these: there will always be bigoted responses to a high profile outsider in any community; and in any business environment there will always be “interesting” characters.  After all, Perth has had a string of of such home grown figures over the last few decades.

That said, though, at a time when the Indian investment potential is crucial for Australia in fields like mining, IT, manufacturing, services and sales, the Oswal story is an unwelcome headline.  As one Indian source notes, part of the recent wide ranging India-Australia bilateral discussions is the creation of an extradition treaty.  If that emerged, then Oswal might become its first star, to no one’s advantage.

Comments

1. Muft khori - August 15, 2011

This messy state of affairs has nothing to do with racism and everything to do with greed and arrogance on the part of Radhika Oswal. Look at Vikas Rambal, a fellow Indian investor who had to extract himself from the Oswal debacle not a minute too soon it would seem.
For many Australians, the distasteful aspect of this matter is the manner in which the Oswals ran away and sprout lies from a safe distance. This is why the Oswals are subject to such loathing and criticism……front up and face the music……or scuttle off underneath a rock somewhere else.

2. auriolweigold - February 10, 2012

Thank you for your comment which has been noted.

Auriol Weigold, Joint Editor

3. auriolweigold - October 3, 2012

Hi Paulina,

I don’t really want to post your comment as it is – would you be happy with my taking out the second mention of posting videos?

Auriol Weigold
Joint Editor, SAM