The story of First Leasing Company of India and its founder & managing director Farouk Irani is truly a Greek tragedy. The company has been barred by RBI, following inspection of its books and records, from conducting any business. The company cannot sell, transfer, create charge or mortgage or deal in its property or assets without RBI’s permission. There is a gaping R1,000 crore asset-liability mismatch in its balance sheet which led to this move.
First Leasing Company was literally the first leasing company set up in India. Its founder then was a young banker who had studied leasing in Hong Kong and Singapore when he was working for the First National City Bank. He adapted what he had learnt for India and hoped that his employer will help him introduce the service in India. The bank felt India was not yet ready for leasing.
The young banker was Farouk Irani who threw up his job to start a leasing company in Chennai (then known as Madras) in 1973. His good friend AC Muthiah (promoter of the Southern Petrochemical Industries Ltd, or SPIC, group of companies ) was willing to put money in this project. Muthiah had been the chairman of the company until he stepped down recently.
First Leasing was set up with a paid-up capital of R25 lakh largely raised through private placement. It was all very straightforward those days. Madras was the chosen location instead of Mumbai as the company did not want to take big risks. “We did not have any predecessor from whose mistakes we can learn from,” said Irani then. When First Leasing completed 25 years in 1998, Irani had declared that Muthiah was a big asset. “He is very receptive and never interferes.” Although Muthiah’s holding in the company was larger than Irani’s, First Leasing had total independence. It never wrote a lease for SPIC or other companies. Nor did Muthiah sign any guarantee for First Leasing.
In those 25 years, First Leasing became the market leader until the big boys moved in. Irani came to be celebrated as the father of leasing in India. He battled for 20 years on behalf of the industry to establish a leasing company’s claim to investment allowance. He set a precedent by getting institutional finance for the first time for the leasing industry.
Ironically, leasing as a concept was fading around this time. In the 1980s about 400 companies got into