The long-standing existential crisis that besets Britain’s steel industry, coupled with the alluring claim of transforming the drab business of supply-chain finance into an art form by using artificial intelligence gave birth to Britain’s biggest lobbying scandal in recent memory. The collapse of Greensill Capital in March 2021, the continued precarious situation of one of its biggest borrowers Liberty Steel, and the public humiliation of the former UK Prime Minister David Cameron were the hallmarks of the scandal which was long brewing and broke this year.
One person who continues to remain under far greater focus than almost anyone else in this saga is Liberty Steel’s Sanjeev Gupta, Britain’s third-largest steel maker, and fifth-biggest private landowner. Why? Because thousands of jobs and the direction that Britain’s steel industry will take are dependent on how well and quickly the India-born, Cambridge-educated entrepreneur manages to keep his empire afloat.
Gupta continues to scramble for financiers, after managing to survive what many termed imminent closure in the wake of Greensill Capital’s collapse.
Earlier this month, GFG Alliance said it had struck a GBP 50 million debt restructuring deal with Credit Suisse, mainly to shore up its steel and coal mining assets in Australia but also to restart its Rotherham electric furnace in the UK.
Gupta was also in the news recently for hosting a lavish party in Mykonos for his 50th birthday. The Financial Times reported that “the itinerary included parties at exclusive beach bars and five-star resorts… as well as a day-trip to the uninhabited nearby island of Rineia. Gupta’s helicopter ferried guests to and from the festivities.”
Sanjeev Gupta and Lex Greensill, founder of Greensill Capital, got a footing in the British establishment by two distinct routes; Gupta endeared himself by taking over unloved steel assets, and Greensill charmed his way into getting a desk inside Downing Street chalking out plans to roll out supply-chain finance in the public sector. Gupta was hailed as the saviour of British steel, and politicians across the spectrum were elated by his zeal to keep the steel foundries burning - the foundries had played a huge role in firing up Britain’s industrial revolution. Gupta's father, Parduman Gupta, started out making steel fasteners in Ludhiana for the biking industry in the 1950s.
Old contact with legendary British civil servant Jeremy Heywood came in handy for Greensill who entered Downing Street in August 2011. As an outsider, the Australian banker got unprecedented access to lay the grounds for the formation of his company Greensill Capital. In simple words, his company would finance suppliers/vendors while they waited to be paid by the companies/buyers who took the delivery of goods or services, in return for a commission after collecting the full amount.
Both Gupta and Greensill had their fair share of critics and cynics. Observers wondered how a virtually unknown company was willing to shoulder the beleaguered steel sector when behemoths were trying to limit their exposure or exit the industry. Gupta lapped up steel units and tubing businesses across the UK from established names like Tata and Caparo, saving jobs and livelihoods. In the USA and Europe he bought assets from Arcelor Mittal. As Gupta’s empire expanded, concerns were raised about the complex nature of the privately held parent company Gupta Family Group (GFG) Alliance, described as opaque.
Civil servants at Downing Street were not happy with Greensill getting a free rein. They pointed out that instead of the public sector, the private sector was more suited to promote supply-chain finance. But Greensill had Heywood's ear. Heywood was appointed cabinet secretary to Prime Minister David Cameron in 2012, which made the unpaid adviser a powerful figure. It was no surprise that despite initial reservations from senior bureaucrats, Greensill got government contracts.
Two years after leaving Downing Street, David Cameron joined Greensill Capital in 2018. He was now working for and under the same unpaid adviser who once had a desk at No. 10. The tables had turned but the dynamics of the relationship continued to hinge on unabated self-aggrandisement. Cameron was given stock options which would have been worth millions of pounds. Greensill was made a Commander of the Most Excellent Order of the British Empire in 2018, a formal marker of entry to the movers and shakers belonging to British society’s swish set.
All along Greensill kept on driving home the mantra of ‘democratising finance’ and using complex algorithms to increase efficiency and maximise returns. Similarly, Gupta’s emphasis on protecting jobs upon taking over steel plants earned him accolades from influential labour unions and a section of commentators. But keen business reporters remain unconvinced of the durability of both their models.
GFG Alliance has a collection of businesses in steel, energy and trading of which Liberty Steel is the most visible part in the UK. But as mentioned earlier, its opaqueness due to the lack of one single set of published account failed to inspire confidence. This particular structure makes it not only difficult but almost impossible to know the real position as GFG Alliance is more like a network of interconnected businesses owned by members of the Gupta family. The group promised to publish a consolidated account for Liberty Steel in 2020, which didn’t happen.
GFG Alliance’s opaqueness was perhaps a small price to pay for the UK government’s unwillingness to nationalise steel or stitch a coherent strategy for the beleaguered sector. Liberty Steel has spoken about how Gupta’s zeal was a boon for British steel, a foundational industry. With help from Greensill’s financial engineering, Gupta’s model of resuscitating dying steel units and furnaces was on an uptick.
When the pandemic struck and the UK government came up with various schemes to help businesses, Greensill Capital was approved to issue government-backed loans in 2020. GFG Alliance was given seven loans of £50 million, out of which six of them were given on a single day – 30 September 2020. Just a month before receiving the Covid grants, in August 2020, Nicola Gupta, Sanjeev’s wife, bought a trophy mansion in Belgravia, in posh central London, which is worth £42 million. In February 2020, Liberty Steel bought Adhunik Metaliks in Odisha marking its entry into India. As Indian lenders declined to lend money, the deal was financed by lenders based outside India.
The dawn of 2021 came with high expectations, but it only brought out the worst. Covid wreaked havoc and a third lockdown was announced in the UK. In February 2021, German regulator BaFin told the Bremen-based Greensill Bank to cut its exposure to GFG Alliance. Greensill had taken over the bank (known earlier as Nord-Finanz Bank) in 2014, but the missive from BaFin meant that the Gupta-Greensill teamwork, which had ducked getting a regulatory red card, could get more than a slap on the wrist.
Within a few days, insurers withdrew cover from Greensill making the assessment that it was overexposed and the loans to GFG Alliance’s companies were vulnerable. On March 8, Greensill Capital filed for insolvency saying that GFG Alliance had defaulted on payments and that it was unable to repay $140 million loan to Credit Suisse. Over the years Greensill Capital had lent GFG £3.6 billion.
Gupta is in talks with a bevy of financiers using his vast portfolio of assets to tide over the crisis he faces with the collapse of Greensill Capital. The Serious Fraud Office (SFO) launched an investigation into the relationship between GFG and Greensill Capital. Gupta and Greensill have consistently maintained that they have indulged in no wrongdoing.
The UK government has made it clear that they are interested in rescuing the steel sector, but not necessarily Liberty Steel. In March 2021, Business Secretary Kwasi Kwarteng turned down a request from GFG Alliance for a £170 million bailout to cover operating expenses and Covid losses, citing concerns that taxpayers’ money needed to stay in the country. The request for the bailout came even as Gupta’s wife undertook a revamp of their London property after getting permission from the local council.
But the Greensill-Gupta saga acquired unprecedented longevity when it was revealed that David Cameron lobbied with his ex-colleagues to give the company a bigger role in the disbursal of Covid loans to British businesses. Greensill was allowed to issue Covid loans up to £50 million; it consistently requested to increase the cap to £200 million, which was never granted. Cameron and his staff sent 45 texts, emails and WhatsApp messages between March and June 2020. This included reaching out to key ministers like the Chancellor Rishi Sunak, cabinet office minister Michael Gove, health secretary Matt Hancock, vaccines minister Nadhim Zahawi, and senior civil servants.
TV graphics and special features in newspapers using big fonts have relayed the messages Cameron sent to his ex-colleagues. Suffice it to say that the former PM who also stood down as an MP has lost political capital. And along with it with millions of pounds, as Greensill was unsuccessful at a stock market floatation. But all those text messages and phone calls to senior figures in government when the UK was tackling the pandemic came at a price which the BBC put at $10 million before tax for 2.5 years as a part-time adviser. It is difficult to imagine him now getting a similar lucrative payout in the near future, with the closest option being writing a book.But that’s not an option for Greensill or Gupta.