BUSINESS MAHARAJAS

by

Gita Piramal

A freelance journalist with a Ph.D. in business history, GitaPiramal is

the author of the best-selling Business Legends and the co-author of a

pioneering work on business history, India's Industrialists. She has

also contributed to the seminal volume Business and Politics in India-A

Historical Perspective, edited by Dr. Dwijendra Tripathi and published

by the Indian Institute of Management, Ahmedabad. She has been writing

and commenting on the corporate sector for over eighteen years for

leading Indian and international newspapers such as the UK's Financial

Times and Economic Times.

Piramal has been involved in the making of television programmes on

Indian business for the BBC and for Plus Channel.

She is married to industrialist Dilip G. Piramal and they have two

daughters, Aparna and Radhika. Piramal divides her time between Mumbai

and London.

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First published in Viking by Penguin Books India (P) Ltd. 1996 First

published by Penguin Books India (P) Ltd. 1997

Copyright Gita Pirama11996

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owner and the above mentioned publisher of this book.

For

Aparna and Radhika my two little gurus

Acknowledgements

The maharajas for their time

Dilip for his confidence in me

Khozem Merchant, Nishit Kotecha, Subniv Babuta and Sailesh Kottary for

their suggestions

David Davidar for his encouragement

Krishan Chopra for his constructive criticism Sindhu Sabale for my data

bank my parents for their support

Harsh Goenka for the title

Contents

Introduction ix

Dhirubhai Ambani 1

Rahul Kumar Bajaj 85

Aditya Vikram Birla 135

Rama Prasad Goenka 211

Brij Mohan Khaitan 261

Bharat and Vijay Shah 313

Ratan Tata 363

Appendix 408

A Note on Sources 411

Select Bibliography 415

Index 462

Introduction

Like the territorial rajas of the past, businessmen today rule vast

empires, maintain a watchful eye inside and outside their boundaries,

and protect their turf against invaders. The eight featured here are

among India's most powerful men. Between them, they control sales of

roughly Rs 550bn through over 500 companies and directly employ at

least 650,000 people. Switch on a light, sip a cup of tea, have a

shave, listen to music, drive to work, see a movie, snuggle into a

pillow--and you'll find yourself using their products through the day

and into the night.

They are a study in contrasts. Their businesses are distinct and

varied. Some are highly educated, others are college drop-outs. Some

are inheritors, others self-made. Some topped their chosen field in

their thirties, others didn't approach the starting line until their

fifties. Some dominate a particular business, others control more than

one industry. What they do,. what they think, how they react impacts

the entire economy, not just their customers, shareholders, employees,

and bank managers. So how do they think? How do they conduct their

businesses, arrive at complex investment decisions involving

*

Sums have mostly been expressed in millkm,lkm. The equivalents in of

lakh/crore arc: ten lakhs: one million; ten million: one crc; 100 cro:

of billion

(1,000 million).

x / Business Maharajas billions of rupees, or hire and fire the

executives who manage their dominions?

For me, the challenge has always been to find out why a company behaves

the way it does, to understand the people and the compulsions behind

business events. Inevitably, therefore, this is a book about business

personalities. Management gurus love to talk about strategy and

strategic decisions, but the. more I learn about business, the more

I'm convinced that management decisions are based on the personal

experiences, aims and vision of one person. Usually it's the head of a

business house or the chairman of a company, but sometimes crucial

decisions can be taken by unexpected people, as I found to my surprise

while researching this book.

I learnt, for example, that the Williamson Magor group's Rs 2.9bn

decision to acquire Union Carbide India was not taken by blue-ribboned

directors in its boardroom at 4 Mangoe Lane but in the tranquil drawing

room of Shanti Khaitan. In 1994, every financial journal covered the

sale, billed as the biggest takeover in Indian corporate history.

Discussing the deal with the Khaitans, I found that their bid was based

not so much on the advice of bean counters but on human factors.

Worried that their son Deepak was spending too much time in their

stable of three hundred horses and not enough in his garage of

engineering companies, Shanti persuaded her husband, Brij Mohan, to

make an offer for the famous battery maker. Deepak needed to settle

down, and she was convinced that a big company like Union Carbide would

be just the right ticket.

At one time, Bhiki Shah was a far more worried mother than Shanti. In

the late '70s,her younger son Vijay had established a tiny office and

:a state-of-the-art factory at Saphadz, outside Tel Aviv. It did so

well that in 1981 it received the Israeli government's highest export

award and the

Business Maharajas / xi next year, sales surged from $2m to $21m.Persuaded that the future for him lay in Israel, Vijay--who speaksfluent Hebrew--wanted to settle there but Bhiki protested. "My motherused to hear about bomb scares an dall those things on television. So we thought we had better settle down in Antwerp," says Vijay. Therebyhe altered the course of B. Vijay kumar & Company.

I doubt if there's a more fascinating businessman than DhirubhaiAmbani. As a petrol station attendant, he used to dream of heading ahuge company, maybe a global multinational like his first and onlyemployer, Burmah Shelll All teenagers dream but how many have theability and doggedness to turn fantasy into reality? Ambani founded abrash, upstart company which challenged the established business housesand their way of conducting business. He fought for and seized paper license, converting them into large textile mills and huge petrochemical complexes.

Through the process of building Reliance Industries into a corporatebehemoth, he rewrote management theories, fought with India's mostfearsome newspaper, made friends with prime ministers, and became the onlybusinessman to be lampooned as often as Rajiv Gandhi. He nailed hisnameplate onto an office door in 1966: From next to nothing, within twodecades, sales had ballooned to Rs 9bn, making Reliance one of India'stop ten companies, but Ambani wasn't satisfied. Sitting at his deskone day in 1984, he drew up a flow chart. If he built such-and-suchfactory, added a division here and a unit there, ten years down theroad, Reliance could become a Rs 80bn company. Sceptics laughed whenhe announced his plans, but he proved them wrong. In 1995, salesnudged Rs 78bn. Some say Ambani is an acronym for ambition and money.It's probably true.

In the '80s, Reliance grew at an astonishing 1,100 per cent,with sales moving up from Rs 2bn to Rs 18.4bn, but it wasn't India'sfastest growing company. Its expansion trailed behind Bajaj Auto'sincredible growth rate of 1,852 per cent. Under Rahul Bajaj, thePune-based scooter company's sales swelled from Rs 519m to Rs 18.5bnduring the same decade. Both Reliance and Bajaj Auto are lean and owner-driven corporations, yet in terms of character, style,background----every parameter that countsis there couldn't be two moredissimilar chairmen than Dhirubhai Ambani and Rahul Bajaj.

Ambani is a first generation entrepreneur, the Bajajs were rich longbefore Ambani was born. Ambani hustled in Bombay's teeming marketsselling yarn and later fabrics. Bajaj didn't have to hustlemthere werelong queues of people outside his airconditioned office patientlywaiting to be allotted scooters. Ambani Cultivated political contacts,Bajaj was born into a family of patriots. Mahatma Gandhi referred toRahul's grandfather as his fifth son; Rahul's father was a Congressmember of Parliament. Yet the government raided Rahul Bajaj twice,stalled his repeated applications to build new factories and expandproduction, and wouldn't let him diversify. In 1987 he wanted to buyinto Ashok Leyland, a truck maker, but to clinch the deal, he neededdollars. The government wouldn't exchange his rupees and he lost theopportunity. Despite the difficult conditions he worked under, Bajajestablished Bajaj Auto as one of India's rare world-classorganizations.

The late Aditya Birla came from a family with as rich a politicallegacy as Rahul Bajaj. Birla had an appetite as voracious or morem ifthat's possible--for empire-building as Dhirubhai Ambani. To feed it,Birla built 2.3 factories annually, on time and within budget, forthirty consecutive years. His corporate feats were so awesome thatevery entrepreneur worth his red ledger and Excel spreadsheetwanted to know how Aditya Birla ran his operations. How could he packin so much in such a short time? Could Birla's trade seci'cts betaught and replicated? Yet at the end of the day, his wife of thirtyyears wondered:' "He used to say "I do this for getting more power", butI don't think that was the case because he never made use of thatpower. So what good was". Like Ambani and Bajaj, Aditya Birla was a green field man,preferring to build his own companies rather than buy what others haderected. Once they were up and running, he would guard them jealously,fending off marauders. Some of the attackers were his own cousins,which made the battles within the Birla clan even more exciting forthose watching from the sidelines.

In terms of sheer drama, there's little to beat takeovers and buy-outs.That's why acquisition stories are couched in military terminology.Cloak-and-dagger secrecy is what makes Rama Prasad Goenka, India's

buy-out specialist, so interesting. Who's selling and at what price,who's buying and at what price? Much can go wrong in deals wherepolitical strings have to be pulled and mega bucks change hands, butGoenka usually gets what he wants without too many glitches. Therewere only a few ripples when he silently picked up Ceat, a tyre maker,and later CESC, a power generator and distributor. In contrast, reamsof newsprint forced Dhirubhai Ambani to abort his bid for Larsen &Toubro.

The first company Goenka bought was the Calcutta-based Duncan Brothers.His father had managed to wrangle him a job in the prestigious managingagency firm as a covenanted assistant on the princely salary of Rs 350per month, but within a week RP tendered his resignation in protestagainst the racism rampant in the Scottish firm. The Raj was at itspinnacle, it wasRP's first job, and his father was furious. RP was forced to swallowhis pride and return--which made the acquisition all the sweeter whenit came through in 1963. A dozen buy outs later, Goenka entered thetop twenty leagues but he would become a cover boy only in 1989 when heshot up the corporate ladder to fourth place from thirteenth.

One of Goenka's closest friends is Briju Babu, the tea baron. Once,when he was shopping in London, a bomb hurled Khaitan twenty yards fromthe doorway of Harrods. Nineteen people died. He survived. Brij

Mohan Khaitan survived also the riots of pre-Independence Calcutta whenMahatma Gandhi prayed nightly for peace in the has tis of a citydescribed as a 'hell-hole'. He survived too the Naxalite movement,staying on in Calcutta when other Marwaris abandoned the city for NewDelhi and Bombay. Khaitan is the only businessman in this book whoemploys a private army. It patrols his tea gardens day and night.

Bodyguards and guns are a way of life for this intensely private and

deeply religious man. He doesn't like them, but he doesn't have a

choice. How else will he deal with terrorist groups such as ULFA and

Bodo militants in Assam? After every murder, Khaitan has to keep high

not only his own morale but also that of those who depend on him. The

life of this tea maharaja provides an insight into a shadowy world far

removed from glossily printed profit and loss statements, the Calcutta

Stock Exchange and high profile tea auctions.

The world of diamonds is almost as shadowy and dangerous as that of the

tea gardens. Security cameras unblinkingly eye visitors to the offices

of Bharat and Vijay Shah, and armed guards swing their firearms

warningly in front of massive vaults housing millions of rupees worth

of glittering carbon. It's a far cry from the clever videos of

gorgeous women clad in little more than a necklace and earrings.

s / xv

Bharat and Vijay, both college drop-outs, started from scratch like

Dhirubhai Ambani, a fellow Gujarati. In ten years, the brothers built

a Rs 35bn international empire selling an Indian product which is

globally competitive. To get to where they are they had to break the

hold of a group of Hasidic Jews, identifiable in diamond markets by

their long flapping black overcoats, curly forelocks and wide-brimmed

dark wool hats. The tentacles of this trade used to stretch from De

Beers' legendary mines in South Africa and Australia to the auction

rooms of New York and Tel Aviv, Antwerp and London. The Shahs and

other Palanpuri Jains brought the business to Surat and Bombay, where

nimble diamond cutters cut and polish tiny brown stones, turning dross

into gold. How did they do it?

To make the Tata group globally competitive is one of the priorities

Ratan Tata, the head of India's biggest business house, has set for

himself. The group is at a watershed in its 125-year-old history and

Tata knows he has to take urgent steps to prevent the group from

plummeting into terminal decline. It's hard being a Tara. The surname

doesn't permit failure and the early years of his business career were

distinguished more by losses than profits. In the five years since

he's been in the addle, Tara has come a long way. Under his

leadership, Telco and Tisco, the group's two biggest companies which

between them contribute over half the group's sales and profits, are

performing better than they have ever done before. The other

eighty-two companies are being spruced up and with every little

improvement, Tata brings the group closer to his goal of 'living in

today's world'.

Restructuring, in fact, is a recurring theme in all seven of this

book's chapters, reflecting the concern of these businessmen about the

future. The end of the Licence Raj with its corollary of greater

industrial opportunity, stiffer competition from domestic and

international rivals, the financial revolution, the lure of foreign

markets, the shaky promise of globalization, and various aspects of the

liberalization programme have generated considerable debate about the

direction of change and how Indian industry should rise to meet these

challenges. Virtually all eight businessmen profiled here have either

already initiated or are about to initiate far-reaching changes in

their organizations, and an attempt has been made to outline their

strategies and to explain the rationale behind the individual

responses.

Business Maharajas doesn't limit itself to the top five or ten business

houses but profiles India's most fascinating tycoons. How were they

chosen? One guiding principle used was to look both into the past and

the future in order :o make a selection. They had to be men who

controlled business empires which were established in the twentieth

century and which will flourish in the twenty-first century. There's

no point picking shooting stars: yesterday's heroes shouldn't turn out

to be tomorrow's nonentities..

There are many superstars who are equally--if not more--interesting,

such as Vijay Mallya, the jet-setting liquor king, or Subhash Chandra