Go First's insolvency caps Wadia group's steady decline

Go First's woes had been mounting for a while and its fate seemed sealed after it posted its biggest annual loss in fiscal 2022.

The insolvency filing of Go First is a serious blow to the Wadia group, once one of India's top conglomerates. Go First's woes had been mounting for a while and its fate seemed sealed after it posted its biggest annual loss in fiscal 2022. The management has cited operational problems in the last few months with half of its aircraft grounded due to supply chain disruptions related to Pratt & Whitney (P&W) jet engines as the reason for the current situation. While that’s true, the airline, which owes its financial creditors Rs 6,521 crore, has had other issues as well.

While it wasn’t ever a meaningful contributor to the group’s profits, and has for a while been a funds guzzler, it was one of only two flagship companies in the Wadia stable that could lay claim to a strong market presence. Now, with Bombay Burmah and Bombay Dyeing too well past their prime, only Britannia remains as a reminder of the conglomerate’s storied past. Bombay Dyeing posted a net loss of Rs 460 crore in FY22, after an equally steep Rs 469 crore loss in FY21. Effectively, it is only Britannia's solid showing, a net profit of Rs 1,516.2 crore in FY22, that brings any cheer to the group’s finances.

The financial underperformance has been compounded by recent run-ins with regulators. Last October, the Securities and Exchange Board of India (SEBI) barred Bombay Dyeing Company along with its promoter entities, Nusli Wadia, Ness Wadia and Jehangir Wadia, from the securities market for a period of two years for alleged misrepresentation of financial statements over a six-year period starting FY12. Nusli Wadia's rift with his son Jehangir Wadia, which in 2021, saw the latter resigning as managing director first of Go Airlines and then of Bombay Dyeing before finally quitting the boards of the remaining listed group companies, Britannia Industries and Bombay Burmah Trading Corp, was another sign of internal turmoil.

Britannia Example

Varun Berry's phenomenal run at Britannia, whose market cap has shot up to $13 billion in his nine years as its CEO, underscores the benefits of having a professional leader in charge for a sustained period. Go First has suffered on that count with seven CEOs in the last 10 years. Indeed, when it drafted Ben Baldanza as vice chairman of the board in March 2021, the airline announced that the appointment would be part of a long-term plan to professionalise the management. Clearly, it was too little too late.

Strangely for a group that was in the past known for its adventurous spirit and its risk-taking ability, the Wadia group's investments in seeding new businesses in emerging areas have been very few. Distractions like a cricket franchise and a fashion magazine aside, Go First is about the only substantial bet it has placed in the last two decades. The airline business has always been fraught with risk and its failure means that the Wadia portfolio is suddenly rendered bare. For a group with its antecedents going back several centuries - both Bombay Dyeing and Manufacturing Co Ltd and Bombay Burmah Trading Corp Ltd (BBTC) are more than 100 years old - and a massive landbank worth billions, that’s a sorry state of affairs.

Time was when Nusli Wadia punched well above his weight. His connections with powerful politicians and other business tycoons were legendary. Feisty to a fault, he's never hesitated to cross swords with the mightiest, as with his backing of Cyrus Mistry in his boardroom battle with Ratan Tata. But at 79, the lion in winter is finding his territory shrunk. With his two sons, unable – or unwilling – to engineer a turnaround, a proud legacy is now in danger of sinking into irrelevance.

Sundeep Khanna is a senior journalist. Views are personal, and do not represent the stand of this publication.