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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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