How Singh Brothers’ Aviation Dream Burned A Rs 1,200-Crore Hole

In the dramatic collapse of their empire, the Singh brothers didn't just lose control of their healthcare and financial services businesses. They have almost run a chartered airline company into the ground, burning a Rs 1,200-crore hole in their fortune.

Ligare Aviation Pvt. Ltd., which provides planes and helicopters on demand, is owned by Malvinder Singh and Shivinder Singh. Their partners, at least for five years, were Gurpreet Singh Dhillon and Gurkirat Singh Dhillon—the sons of their guru Gurinder Singh Dhillon, head of Radha Soami Satsang Beas, according to filings with the Registrar of Companies. And the carrier was at one time managed by Sanjay Godhwani, brother of the family's long-time associate Sunil Godhwani whom they now blame for their downfall.

In short, the same set of people connected with a debt-spiral behind the fall of Singh brothers' multi-billion-dollar fortune, as reported by Bloomberg citing public records and unnamed people close to the family. Lenders stripped them of control in Fortis Healthcare Ltd. and Religare Enterprises Ltd., they face allegations of siphoning funds and still owe Daiichi Sankyo Rs 3,500 crore in arbitration award.

Taking To The Skies

The brothers were still billionaires and ran a thriving business when they took control of the airline in 2006—about two years before they sold Ranbaxy for $4.6 billion. The carrier, then called Ran Air Services Pvt. Ltd., was owned by Vidyut Investment Pvt. Ltd., a subsidiary of Ranbaxy.

BloombergQuint's analysis of RoC filings revealed how the Singhs came to own the airline and why it is buried under debt.

In June 2006, they floated a joint venture called Religare Voyages Pvt. Ltd. (later rechristened Ligare Voyages) with a 74 percent holding; the Dhillons picked a 24 percent stake and Sunil Godhwani took 2 percent. Thirteen days after inception, the company bought Ran Air Services for Rs 2.6 crore and renamed it Religare Aviation (later called Ligare Aviation).

The value of its aircraft assets rose 100 times to Rs 668 crore by 2010-11 as the airline added planes in the next five years—the filings didn't disclose how many by then. The expansion was fuelled by a debt of Rs 641 crore, a large part of it comprising bank loans.

Still, the carrier hardly made money and RHC Holding Pvt. Ltd.—the investment arm of the Singh brothers—infused funds to support its operations, increasing their stake to 81.46 percent by March 2011. The Dhillons also ploughed additional investments.

The carrier paid an interest of Rs 61 crore a year on a bank debt of Rs 528 crore in 2010-11. As the revenue didn't even cover interest payments, it started selling aircraft to scale down operations.

Rescuing The Guru's Family's Investment

Then the Dhillons decided to sell their holding. And the Singhs ensured that their guru's family didn't suffer any loss.

The Dhillons' investment arm Logos Holding Pvt. Ltd. sold the stake, which had come down to 16.8 percent, to RHC Holding in 2010-11 for Rs 22.74 crore, just about managing to get their invested capital back. The selling price, however, was five times the value of their shares based on the net worth of the airline at the time. The carrier reported accumulated losses of Rs 255 crore that year.

The brothers, the Dhillon family and Godhwani have yet to respond to BloombergQuint's emailed queries.

Customs Trouble

Ligare Aviation ran into other hurdles as well. In 2015-16, seven out of its 11 aircraft were seized by the customs department for a full year. Its directors, including managing director Sanjay Godhwani, resigned mid-year.

Revenue dropped 70 percent year-on-year and the company reported a loss of Rs 187 crore in 2015-16. In the following financial year, two aircraft were still with the customs authorities.

And downsizing continued as its fortunes continued to slide. In the decade through March 2017, the carrier's expenditure was 3.5 times its sales. And operational losses mounted to Rs 1,073 crore compared with a Rs 441-crore revenue generated during the period.

The only reason it survived was additional infusions by RHC Holding to fund expenses and repay loans. The Singh brothers through their holding firm and other group companies in all invested about Rs 1,219 crore in fresh equity and by subscribing to preferential shares, according to the filings. They now own nearly 100 percent of the airline.

Yet, none of that helped. The carrier, as of March 2017, had:

• Accumulated losses of Rs 1,004 crore.
• Total debt of nearly Rs 462 crore, of which Rs 217 crore is secured against movable fixed assets.
• The net book value of 11 aircraft stood at Rs 147 crore.
• Its net worth was a negative Rs 169 crore.
• The company hasn't disclosed its numbers for 2017-18 yet.

In September last year, Sunil Godhwani, too, quit as a director.

The airline is still operational and takes bookings, according to its website. It had five flight-worthy planes and one helicopter in its fleet as of January this year, according to information on the website of Directorate General of Civil Aviation.

Yet, the carrier's ability to stay afloat—as a going concern—depends on the financial support pledged by shareholders, according to its auditor's disclosure in the financial statement for 2016-17. Those shareholders are the Singh brothers. Given their debt and arbitration dues to Daiichi Sankyo, keeping Ligare Aviation afloat will be tough.