Business Maharajas is about these business personalities. Instead of concentrating on strategy and strategic decisions, Gita Piramal focuses on the personal experiences, aims, and visions of these important industrialists to expose how they think, how they conduct their businesses, and how they arrive at complex investment decisions involving billions of rupees. These eight of India’s most powerful men, are a study in contrasts. Their businesses are distinct and varied.
Some are highly educated; others are barely educated at all. Some inherited their empires, others are self-made. Some reached the top in their 30s; others did not even get started until their 50s. Some dominate a particular business, others control several industries. Yet what they do, what they think, and how they react impacts the entire economy. Between them, they control sales of roughly Rs 550 billion through more than 500 companies and directly employ at least 650,000 people.
Whether an individual is turning on a light, sipping a cup of tea, shaving, listening to music, driving, seeing a movie, or sleeping, he or she is using one of their products. About the author A freelance journalist with a Ph. D in business history, Gita Piramal is the author of the best selling business legends and the co-author of a pioneering work on business history, India’s industrialist. She has also contributed to the seminal volume business and politics in Indian- a historical perspective, edited by DR. Dwijendra Tripathi and published by the Indian institute of Management, Ahemdabad.
She has been writing and commenting on the corporate sector for over eighteen years for leading Indian and international newspaper such as the UK’s financial times and economic times. Piramal has been involved in the making of television programmes on India business for the BBC and for plus channel. She is married to the industrialist Dilip. G. Piramal and they have two daughters, Aparna and Radhika Piramal divides her time between Mumbai and London.
India’s Stock Market Messiah In 1958, at the age of 26, Ambani took a loan and started the Reliance Commercial Corporation, a trading firm, dealing basically in commodities like ginger, cardamom, pepper, etc. , with a mere Rupees (Rs) 15,000. As the money started flowing in, he shook off his village mentality (if he had any) and learned to spend money in a big way. To Ambani, it was not extravagance, but a broadening of the mind-a lesson he had learned while working at Burmah Shell. In the mid-1960s, Ambani switched from spices to textiles and soon built a new mill.
By 1977, the year he went public, the mill was earning a profit of Rs 43. 3 million from revenues of Rs 700 million. Each year he enlarged the mill and added new machinery that was the latest and the best. His philosophy was: “Play on the frontiers of technology. Be ahead of the tomorrows. ” Ambani was the first Indian industrialist to appreciate ordinary investors and their needs. His philosophy that management has a responsibility toward its shareholders to ensure the capital appreciation of their shares has changed the entire mindset of corporate India and its way of doing business.
Between 1977 and 1995, Ambani mobilized Rs 64. 23 billion from the public (the company went public with 58,000 investors, today there are more than 3. 7 million), making Reliance India’s most popular enterprise in the process. Ambani’s modern way of thinking brought about his second achievement- the idea that Indian manufacturing should be of the highest quality. Thus, he was the first Indian industrialist to build facilities that could be compared to the best internationally in terms of volume of production and quality of output.
Prior to Ambani, most Indian plants were very small. But before he could build his world-size plants, he had to obtain hundreds of licenses, and for that, he had to force India’s bureaucracy to review its entire licensing system. Thus, his rise has been accompanied by controversy. Some in the corporate world believe he is a visionary while others consider him to be a manipulator and a crook, whose success comes from personal patronage rather than proficient management. They claim he will go to any length to achieve his motto: “Where growth is a way of life.
India’s most successful industrialist Rahul was born on June 10, 1938, in Calcutta to Savitri and Kamalnayan Bajaj, a marwari businessman. Pragmatism is Bajaj’s hallmark, earning him the rare reputation as one of India’s most admired industrialists. The business press adores him because he has built Bajaj Auto (1995 sales of Rs 22 billion) into the world’s third largest two-wheeler manufacturer. Yet, compared to his business peers, he appears rather colorless—being something of a plodder ho sticks to his knitting.
Bajaj has been turning out scooters since 1964 and is perfectly happy to continue doing so into the next century. He believes that if Bajaj Auto cannot be a world player in its industry, it does not have the right to diversify. Although the company controls six percent of global scooter production, to date its market is almost wholly limited to India. Its product would need substantial technological upgrading to make it internationally acceptable.
For Bajaj, the Licence Raj (the government bureaucracy established to grant business licenses) was a nightmare, for it stubbornly refused, on socialist grounds, to allow the company to expand its manufacturing facilities. Despite this strait jacket, Bajaj made his scooters so popular that a flourishing black market developed. Nonetheless, he refused to exploit the situation and held the price line, ensuring that his customers obtained the best possible Product at the lowest possible price, and that his employees received a fair wage.
The long-desired permission for major capacity expansion came between 1977 and 1979 and again in 1982. This last permission came just in time. Local and international competition has since heated up, and the fact that Bajaj Auto has a world-size plant gives it a vital edge, while economies of scale help make it extremely profitable. As for the future, it will be interesting to see how Bajaj plans to conquer the world since he does not have an internationally accepted product (most of the world uses cars or motorcycles).
Moreover, as of 1994, Bajaj Auto was the only automobile-related company in India without a foreign auto manufacturing partner. It would. Also be difficult for Bajaj to attempt to develop a popular range of powerful motorcycles since his R&D department is not at all innovative and it is unlikely that anyone will give this potential giant the necessary technology anytime in the near future. Aditya Vikram Birla -The Management Guru Birla, who died in October 1995, was the only Indian businessman to routinely make it to Forbes’s list of the world’s billionaires.
Over the span of 25 working years, Birla built some 70 plants in India, Thailand, Indonesia, Malaysia, Egypt, and the Philippines—manufacturing acrylic fiber, aluminum, aluminum fluoride, anhydrous sodium sulphate, argon gas, bleaching powder, carbon black, carbon di-sulphide, caustic soda, chlorosulphonic acid, coconut oil, fertilizer, flax, hosepipes, hydrogen peroxide, industrial machinery, insulators, lightning arrestors and condensers, palm oil, poly aluminum chloride, paper, polyester filament yarn, polynosic and other specialty fibers, portland cement, rayon grade pulp, sea water magnesia, sponge iron, sodium ripolyphosphate, sulphuric acid, textiles, viscose filament rayon yarn, viscose staple fiber, and white cement. He also built a string of small power plants. In 1995, group sales from these enterprises totaled Rs 150 billion. Many ask: How did he do it? How did he keep so many balls in the air.
What special managerial skills did he draw upon? For no other Indian businessman can claim to even remotely match Birla’s ability to build factories from scratch. Indian Rayon, Birla’s first company, provided his initial management education. Here he learned the value of continuous growth, adding to Rayon’s spinning and weaving capacity every year. Avoiding technology for technology’s sake, he believed that the basic aim of technological advance should be to reduce the cost of production. Today, continuous growth is still a primary goal. Birla’s companies are profitable powerhouses, not through spectacular growth but through hundreds of small improvements.
It is a strategy that is diametrically opposed to the one used by Ambani. Birla’s companies also differ from Ambani’s in that they are highly diversified, yet, they all manufacture basic requirements—fiber for clothing, iron, steel, and cement for building, etc. Birla believed that he could not go wrong provided he gave good value; thus, after continuous growth and size, he placed great importance on quality. Under his father’s supervision, Birla acquired a meticulous knowledge of accounts, particularly the partha. This centuries-old traditional Marwari (merchant class) system of monitoring and financial control, which essentially asks, “What does it cost to make? Was considered by Birla to be the ideal vehicle for combining the conflicting needs of central management control and Executive delegation. Today, it is almost unique to the Birlas who use it extensively.
Finally, Birla understood that he needed good capable People upon whom he could rely. He reasoned that his success lay in the fact that he always gave his employees tremendous powers and independence to make decisions and set policy, while monitoring their performance. This approach allowed him to build up an inner circle of highly Talented professionals. Rama Prasad Goenka –The Out Performer The Goenka’s, whose fortune was founded on their associations with the British, are blue-blooded members of Calcutta’s Marwari aristocracy.
During the Raj, they acted as commission agents for European managing agency firms, so it was in one of these firms, Duncan Brothers, that Keshav Prasad obtained the job of executive assistant for his eldest son, Rama Prasad (RP). This was in 1951. By 1957, Keshav had completely taken over the company, which in addition to its flourishing trading activities, owned Anglo-India Jute and Birpara Tea. As tea profits increased, Duncan Brothers became a rich war chest, enabling Keshav and his three sons, RP, Gouri, and Jagdish, to acquire Coorla Mills, Asian Cables, Jubilee Mills, Swan Mills, B. N. Elias Group, and Murphy India. But after a while, RP felt stifled and wanted to go his own way, independently of his brothers.
So in 1979, Keshav split his 15 companies, with an estimated combined asset base of Rs 1. 45 billion, three ways. Thus, each brother’s group of enterprises had roughly the same Sales turnover—Rs 750 million. Selling off Agar Para Jute, one of his least profitable enterprises, RP purchased Ceat Tyres of India (in 1981) —India’s third largest tire company after Modi Tyres and Dunlop India. He then bought KEC, Searle India, Dunlop, Bayer, and HMV—a music company.
In 1988 alone, he acquired a power company, two plantations, And a computer hardware concern. These acquisitions and size, he placed great importance on quality. dded almost Rs 10 billion to his group sales of Rs 7. 7. billion in 1988, and propelled Rama Prasad Goenka (RPG) Enterprises up from thirteenth to fourth rank in terms of size. By 1992, RPG Enterprises joined the $1 billion club (Rs 33 billion), and by 1995, group sales were RS 45 billion with profits of Rs 7 billion. Today, RPG Enterprises is an amalgam of haphazard growth. It includes tire companies, pharmaceutical firms, textiles, plantations, hotels, computer hardware businesses, cable manufacturers, a transmission tower outfit, and more, acquired by chance, not design, and without any consideration of synergy.
So although RP’s empire appears to be at its pinnacle, it is perhaps at its weakest. According to McKinsey consultants, RPG has many companies with Impressive sales turnover but none is a leader in its business. Even worse, the group has not developed any technology of its own since it has grown largely through acquisition. But RP is unperturbed by his critics. He says, “To succeed, You need to dream a little. I hope to survive another three to five years. During this time, I will outperform myself. Of this I am sure. ” Brij Mohan Khaitan -The Tea Baron of India In a span of two decades, Khaitan has aggressively assembled a Rs 16 billion empire from scratch through shrewd maneuvering.
As with the corporate empire of his close friend, Goenka, Khaitan’s empire of 25 companies has been patched together almost entirely through buyouts. Apart from tea, he has interests in batteries, engineering, and financial services. In 1995, five of his companies made it to Business Today’s list of India’s 500 most valuable companies. In most of his enterprises, Khaitan’s personal holdings tend to be substantial (from 40 to 74 percent) leading some analysts to regard him as one of India’s richest men. Yet, Khaitan is viewed as a mediocre manager. It has been wondered why he goes after more and more companies when his group has so many lines and is not growing in any Of them.
Thus, he has been accused of buying blue-chip enterprises and making them sick. In addition, shareholders do not consider him investor- friendly. Khaitan’s extensive holdings (valued at Rs 13. 2 billion of the group’s market caps of Rs 22 billion), instead of being perceived as a source of strength, cause investors to shy away. Fund managers, as a rule, usually prefer stocks with steady and high volumes of trading so that they can get in and out easily. Khaitan’s ownership acts as a roadblock. Moreover, analysts dislike the low profitability of his non-tea companies. The lackluster performance of Khaitan’s numerous engineering concerns has greatly contributed to his reputation as a mediocre manager.
The small, scattered, and largely unprofitable companies manufacture a host of products, none of which stands out. Bharat and Vijay Shah -The Carat Czars In the late 1970s, De Beers, the legendary diamond concern of South Africa, woke up to the fact that Indians could usefully cut and polish the brown rough stones being thrown away and create marketable diamonds. This discovery coincided with inflation and the emerging trend in fashion jewelry for diamonds the size of pinheads, which only Indian artisans could deliver. Between 1979–1980 and 1989–1990, exports of polished diamonds surged from Rs 5. 5 billion to Rs 49. 72 billion, with Indians acquiring 62 percent of the global trade.
2 percent of the global trade During this period, diamond merchants, Bharat and Vijay Shah (both college dropouts), became the world’s carat czars, founding and heading India’s largest private empire, a Rs 35 billion conglomerate known as Vijay Kumar (in India) and Vijay diamond (in Belgium), with interests in diamonds, construction, and motion pictures. The Shahs have cutting and polishing factories in Bangkok, A ntwerp, Tel Aviv, Bombay, Surat, and Palanpur, employing more than 22,000 workers. The head office is in Bombay, under Bharat, while the Antwerp office is managed by Vijay As with India’s entire Palanpuri diamond industry, the Shah’s basic fortune came from being in the right business at the right time and at the right place.
They also have the right combination of banking, manufacturing, and marketing abilities, and they are good judges of people. These circumstances have made the Shahs probably among the five richest families in the country, in personal terms. A although groups such as the Birlas and the Tatas run larger corporate empires, their personal wealth is limited by tax laws. In India, however, diamond merchants enjoy tax-free earnings. Moreover, since most of the Shah’s companies are privately owned, they do not have to share profits with outside shareholders. Along with a dozen others, the Shah Brothers began producing jewelry around 1990. In joint partnership with Suresh K.
Mehta, a small-time jeweler, they set up a modest export factory for fashion pieces, which immediately proved its potential. The Shahs also set up a small factory in New York whose turnover is increasing every year. If this new endeavor takes off, it may usher in a mini-revolution in the international fashion jewelry business—for the Shah-Mehta motto is: “Every janitor should wear our Rings. ” To achieve this target, manufacturing costs have been cut by at least one-third, and further cost reductions are being achieved by cutting wholesalers out of the chain. In addition, the Shahs are wooing retailers such as Wal-Mart and other large American discount stores to stock Indian machine-made jewelry.
Nonetheless, Bharat and Vijay are aware that the golden days of the diamond business are over and will never again see the bumper profits of the 1980s. To hedge their bets, they must diversify, and for years have acted as venture capitalists in a range of enterprises: electric car batteries, piped gas, office chairs, roses, pens, and ship-breaking. But most of these enterprises are small to mid-size. To maintain the leadership position they have become accustomed to, the Shahs need to plan bigger and invest in larger projects. As the government opens more doors to the private sector, the choice widens.
In March 1991, Jehangir Ratanji Dadabhoy (JRD) Tata, Tata Group’s chairman since 1938, stepped down to bequeath to Ratan, a distant relative, the chairmanship of India’s biggest business house. That year the corporate empire’s 84 companies saw pre-tax profits of Rs 21. 2 billion on sales of more than Rs 240 billion. Although the Tata group claims to contribute three percent to the national GDP, and annually pays out Rs 35 billion in taxes (approximately 3. 2 percent of total government revenues), JRD left Ratan a tangled legacy with more rough edges than smooth. India was changing and changing so rapidly that the House of Tata had begun to be described as a dinosaur.
Realizing that the group is at a crucial point in its 125-year history, Ratan has been trying to push it into a higher gear. He wants the enterprise to shed its lethargy and become an aggressive player in India’s increasingly competitive environment, and he wants to make it more agile and more modern, both in terms of technology and management systems. Within the Tata monolith is a small team called the Tata Strategic Management Group, often entrusted by Ratan with the sensitive job of analyzing the strengths and weaknesses of group companies and coming up with restructuring programs. Although Ratan’s vision is clear, implementation will be a tough challenge.
Not only is Piramal knowledgeable about the broad business/economic issues that surround India’s business maharajas, she is also an excellent raconteur with an acutely subjective sense of what vignettes to employ to Eloquently bring each of her subjects to life. Thus, you will find that Business Maharajas is a provocative read from start to finish. Because this richly detailed work provides a definitive analysis of Indian business as it is practiced by some of the country’s most powerful and influential business leaders, it stands as an important and indispensable source of information on the men and the industries that are likely to stand at the forefront of India’s push to become an industrial superpower in the 21st century.