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Corporate Nov 20, 2012

Land, network, clout: the many questions around the Chadha empire

By Firstbiz Staff

The death of liquor baron Gurdeep Singh 'Ponty' Chadha has led to speculations about the uncertainty of his business empire.

Media reports say Rajinder Singh Chadha will likely take over as chairman and managing director of Wave Inc after the deaths of his brothers Ponty Chadha and Hardeep Singh Chadha, while Ponty's son, Manpreet Singh Chadha, will take over as managing director of the over Rs 6,000-crore multi-sector business.

However the 30-year-old class IX dropout from Welham's Boys School in Dehradun who is currently the joint managing director of the family's holding company Wave , will see his first road block in the form of retaining the liquor contracts that will come up for renewal on 31 March 2013 in Uttar Pradesh.

The Mayawati government had awarded contract and vending rights for 12 western UP districts to Ponty in 2008-09, making him the undisputed king of UP's liquor business since it allowed him to single-handedly control over 80% of the state's 14,000-crore liquor business.This liquour business alone counts for more than 50 percent of Ponty's empire's worth, which includes realty, sugar, distillery and entertainment businesses.

PTI

However, bagging this contract again is not an easy task for Monty,who is clearly touted as the next successor. According to a report in the Economic Times, "UP, which has an excise tax collection target through liquor trade of a little more than 10,000 crore in 2012-13, is being eyed by the erstwhile bigwigs of the trade such as Jawahar Lal Jaiswal, Badri Prasad Jaiswal, Rakesh Pandey and Ashok Wadia, who were put out of business after Ponty secured the entire wholesale rights of liquor and liquor vends".

Even though Monty has been working on his relationship with the political class in UP, Punjab, Haryana and Uttarakhand, the state government is expected to be cautious in granting the contracts, following reports on his father's proximity with both the BSP and SP government. Senior politicians have already distanced themselves from the Chadha family as despite Ponty's clout, only two political leaders were spotted at his funeral. Moreover, barring Samajwadi Party chief Mulayam Singh Yadav, no other major party or its leader even offered a customary condolence message.

"The SP is already facing allegations of favouring Ponty's company in allotment of contract for supplying nutritious food for the malnourished children under the Integrated Child Development Scheme. Presence of our leaders would have sent a wrong signal," a SP leader was quoted as saying in the Times of India.

Also, Chadha's companies have been probed by Income Tax authorities several times but he had never suffered legal setbacks.

However, a recent CAG report also criticised the Mayawati government for selling five state-owned sugar mills to Chadha at a loss of Rs 1,200 crore to the exchequer. A probe by the Lokayukta has already been ordered in the sugar mills' deal.

Yet, several industry observers feel that Monty will be able to retain the lucrative contracts when they come up for renewal in March 2013.

"The massive manpower with the Wave group is unparalleled. The state would not like to risk its revenues by giving the licence to a smaller player, who would not have the infrastructure or capacity to distribute liquor at such a vast scale," an industry analyst was quoted as saying by the Business Standard.

It is clear that maintaining his father's networks and political clout is the biggest challenge for Monty not only for his liqour business but also for his real estate empire, which, is valued at around Rs 10,000 crore.

Monty has already been running the show at Wave Infratech, which is developing the 132-acre real estate project in Noida and the 4,200-acre Wave City next to Ghaziabad.

While Ponty surely knew how to mint crores from barren land, it remains to be seen if his son can continue the legacy, given that his realty empire is already mired in controversy.

In September, the Supreme Court had issued a notice to the Uttar Pradesh government on a petition challenging the allotment of land to Chadha's realty project in Noida. The petition was filed by 94 farmers whose land was acquired by the state government.

by Firstbiz Staff

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