An Emotional Farewell

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"A bank’s security is only as strong as its underlying assets. When a prestigious operational business falls victim to corporate rivalry and regulatory lockouts, it is often the silent appreciation of its real estate that stands between a bank and a write-off."

Of all the industrial accounts I handled during my career in credit administration, none evokes as much pride and lingering sadness as Standard Motor Products of India Limited (SMPIL). Financed solely by our bank in Southern India, SMPIL was a prestigious, exceptionally self-contained automobile manufacturing unit located at Vandalur, on the outskirts of Chennai.

At its peak, the factory was a gigantic-sized marvel of domestic engineering, achieving up to 65% in-house manufacturing of all car components right from inception. Under the leadership of its Managing Director, Mr. Karthik Narayanan—a highly qualified engineer and grandson of the legendary Sir C.P. Ramaswami Iyer—the unit employed over 600 workers and was a symbol of Chennai’s industrial pride.

1. The Glories of Vandalur: Standard 20 and Standard 2000

Our bank maintained a dedicated extension counter inside the factory premises. As the branch manager, inspecting this vast account was a physically exhausting task: walking the extensive factory floors, auditing the massive acreage of land, and verifying the hypothecated raw materials and production inventory.

For years, the factory rolled out highly successful utility models like the Standard 20 micro-truck and ambulance. Its diesel engine was celebrated across India for being "souped up," reliable, fuel-efficient, and noiseless—a signature trait of the company's historic Standard Herald and Standard Gazel models.

Encouraged by this success, the company launched the Standard 2000, a luxury saloon car aimed at the premium segment. The market reception was highly enthusiastic: The vehicle possessed genuine export viability, securing Australasian ambulance orders, British police vehicle inquiries, and multiple export letters of credit. We supported this growth by granting Packing Credit Facilities to fund export manufacturing, and imported substantial inventories of components in Completely Knocked Down (CKD) condition, which were stored under custom bond inside the company's warehouses.

2. The Bolt from the Blue: Corporate Rivalry and CBI Lockout

The rapid success of the Standard 2000 did not go unnoticed. Rivals in the highly competitive Indian automobile market feared that this modern car would aggressively eat into their market share. Lobbying began behind closed doors, and rumors were spread regarding the Standard 2000’s fuel efficiency. While advertised at a respectable 12 kilometers per liter, critics claimed it could barely deliver 6 to 7 kilometers per liter when driven in stop-and-go traffic with the air conditioner running.

What followed was a swift, destructive intervention. Based on these fuel efficiency complaints, investigating agencies, including the Central Bureau of Investigation (CBI), stepped in. CBI launched an inquiry focusing on whether the fuel efficiency certificate had been obtained through bribery. The company’s bank accounts were abruptly frozen, manufacturing was suspended, and the factory gates were locked. As the branch manager operating their frozen accounts, my branch became the target of endless government investigations. Daily, investigators arrived demanding stacks of ledger books, vouchers, and correspondence files.

In an effort to test the allegations, the CBI requested the company to produce five random cars from the assembly line. They selected two of these vehicles to be transported to Pune (Poona) for independent fuel efficiency tests. Our bank cooperated with the company to facilitate this trial. Ironically, under Pune’s controlled test track conditions, the cars successfully demonstrated the exact fuel efficiency rate that had originally been certified. But the truth arrived too late. The damage was done.

3. BIFR Hearings and the Emotional Weight of Insolvency

Locked out of its cash flows, Standard Motors quickly spiraled into insolvency. The company faced a recessionary market, mounting overdues, statutory defaults, and severe labor union pressure. With time running out and the outstanding debt ballooning beyond the company's ability to service, the file was referred to the Board for Industrial Finance and Reconstruction (BIFR).

BIFR hearings in New Delhi were high-tension battlegrounds. I personally attended more than six of these meetings, where hundreds of displaced laborers—having traveled all the way from Chennai on foot from the Delhi railway station—stood outside the venue with desperate, sullen faces.

The Indian banks and IDBI stood firm: "We cannot sink more depositor money into a locked unit. Our existing exposures are already classified as bad and doubtful debts, and we have fully provided for them in our balance sheets. Unless there is clear evidence of refinancing viability, no further lending is possible."

This defensive stance infuriated the BIFR panel. During one particularly heated hearing, the BIFR Chairman lost his temper and threatened me: "If you do not concur with our rehabilitation package, I will have you and your Bank CMD thrown in jail." Even after I was transferred to Bombay as Zonal Manager, my Chairman refused to let me exit the file. The BIFR Chairman firmly ordered me to attend the Delhi hearings without murmur. Facing the rough questioning of the Chairman on one side and the sad, silent faces of the unemployed workers on the other was a heavy emotional burden.

4. Real Estate Recovery and the Shriram Deal

Rehabilitation efforts failed. Major automobile manufacturers, including Eicher Motors and Punjab Tractors, visited the Vandalur site and praised the high-quality manufacturing facilities. However, they were terrified of inheriting the massive debt load without substantial write-downs, which the banks could not agree to. Before BIFR took over, even local Southern industrialist Sri A.C. Muthiah evinced interest in acquiring control of the unit, attracted by the infrastructure, licenses, and the valuable CKD parts stored in the bonded warehouse. But the window of opportunity closed as the debt became too heavy to service.

Ultimately, the Company Court intervened to liquidate the assets. A breakthrough deal was struck with the Shriram Group. Unlike the automotive suitors, the Shriram Group recognized the latent value of the company’s vast real estate assets. Vandalur was rapidly transforming from a distant suburb into a premium industrial and residential corridor. Shriram's assessment was 100% accurate: they acquired the property, paid off the debt, and subsequently developed the land into residential colonies, commercial offices, and industrial conclaves. This recovery helped both our bank and IDBI recover 100% of our outstanding dues, allowing us to write back all our bad debt provisions, immediately boosting our bank’s cash profits and cleaning up our balance sheet.

The Collateral Damage: A Silent Epitaph

While the banks were made whole, the human cost was devastating. Standard Motors had a cluster of subsidiary and supplier companies in Chennai, including Carburetors Limited, Hydraulics Limited, Union Company, and Unipro Exports. When the parent anchor unit at Vandalur collapsed, these group companies suffered severe collateral damage. Their orders evaporated, their bank lines were choked, and hundreds of their own workers were thrown into unemployment.

Today, whenever I travel down the GST Road and pass by the site of the erstwhile Standard Motor Products factory, I am overcome with emotion. I look at the modern residential structures and commercial complexes built by the Shriram Group, and I feel a deep sense of loss. Across the road, where a proud automobile pioneer once stood, there should at least be an epitaph. It should read: "Here lies once a prestigious auto unit, killed by corporate rivalry and overzealous investigation."

Key Credit & Restructuring Lessons

• Consortium vs. Sole-Bank Financing: Financing a large-scale manufacturing unit as a sole lender exposes the bank to extreme concentration risk. In capital-intensive industries, banks should share exposure via consortium lending to distribute the risks of sudden lockout, regulatory freeze, or market downturn.
• Independent Technical Vetting: Relying solely on promoter-provided or advertised technical specs (such as fuel efficiency ratings) exposes the lender to regulatory and litigation risks. Lenders must mandate independent third-party validation of critical performance specs before underwriting large limits.
• Real Estate as a Secondary Out (Asset-Backed Lending): When an operating business model fails, the location and alternative-use value of the underlying real estate security can provide a full recovery path. Asset valuation must account for alternative land-use potential.
• Group Contagion & Supplier Risks: The collapse of a parent anchor company has a severe domino effect on its supplier subsidiaries (e.g., Carburetors Limited, Hydraulics Limited, Union Company). Banks must monitor group-level exposures and set independent credit covenants to buffer these supplier units from parent contagion.